Communities with vibrant entrepreneurial ecosystems more likely to prosper
BOSTON – The prevalence of entrepreneurship is linked to both the regulatory environment and the portion of foreign-born immigrants in a jurisdiction, according to a new study published by Pioneer Institute.
“Jurisdictions with vibrant entrepreneurial ecosystems prosper, while those without them decay,” said Joshua Bedi, author of Open for Business? Entrepreneurship, Regulations, and Immigration in New England and Beyond. “The defining characteristics of jurisdictions with strong entrepreneurial climates are low regulatory burdens and high concentrations of immigrants.”
Bedi finds that the regulatory characteristics most conducive to entrepreneurship are:
Massachusetts and Connecticut have environments that are slightly less burdensome than average, which may account for both having levels of entrepreneurship that have been above the national average for more than 50 years. The impact is even greater in New Hampshire, which has the nation’s least burdensome regulatory environment.
The 20 Massachusetts communities with the lowest tax rates have 15 percent more start-ups per capita and four times more “growth events” per capita than the 19 communities with the highest tax rates.
Bedi measures entrepreneurship as new for-profit business registrants per capita. To capture the most innovative and impactful types of entrepreneurship, he uses a narrower metric: high-value acquisitions of large companies and initial public offerings (IPOs) per capita. While the overall amount of entrepreneurship increased between 2000 and 2015, high-pact entrepreneurship has declined both in Massachusetts and nationally.
There is also a strong correlation between the portion of foreign-born and entrepreneurial activity. Immigrants are more likely to be self-employed than native-born individuals irrespective of educational attainment.
A 1 percent increase in the share of the state population that is composed of immigrants correlates with a 24 percent increase in startups per capita. The increase jumps to 42 percent per capita for high-value acquisitions and IPOs.
Vermont is the New England outlier to the correlation between immigrants and entrepreneurship. Bedi suggests that may be because of the state’s combination of harsh regulation and a low proportion of immigrants.
Among Bedi’s recommendations are that municipalities should streamline the steps required to start a business. He notes that starting a restaurant in Boston requires 92 steps that involve 9 city agencies. Other cities have reduced this to 35 steps.
Bedi also recommends that cities establish an online portal that would allow potential entrepreneurs to log in and navigate necessary paperwork and approvals.
He urges states to incentivize mobility by refusing to enforce non-compete agreements between employers and employees, eliminate occupational licenses that don’t protect public safety, and to advocate for comprehensive federal immigration reform.
Joshua Bedi earned his Ph.D. and was a Mercatus Center Fellow at George Mason University. He is now working at Copenhagen Business School as a Postdoc in Entrepreneurship at the Department of Strategy and Innovation, where he works under the Mærsk McKinney Møller Chair in Entrepreneurship.
This week on The Learning Curve co-hosts U-Arkansas Prof. Albert Cheng and DFER’s Alisha Searcy interview Henry James biographer Sheldon Novick. Mr. Novick discusses the complexities of Henry James’ life and writing career, highlighting his significant literary contributions, the influence of his family’s intellectual legacy, and the realistic portrayal of social tensions in his works. Novick explores Henry James’ life experiences that shaped his novels like The Portrait of a Lady and The Golden Bowl. He shared more on James’ important friendships, particularly with the novelist Edith Wharton, emphasizing James’ enduring influence on modern fiction. In closing, Novick reads a passage from his biography Henry James.
Stories of the Week: Albert shared an article from USA Today discussing state cell phone bans in schools; Alisha reviewed an article from Real Clear Education about how parents picking their children’s schools shouldn’t be a crime.
Guest:
Sheldon Novick is the author of the two-volume biography, Henry James: The Young Master and Henry James: The Mature Master; as well as Honorable Justice: The Life of Oliver Wendell Holmes; and the editor of The Collected Works of Justice Holmes.
Tweet of the Week:
Click here to read a transcript
[00:00:00] Joe Selvaggi: This is Hubwonk. I’m Joe Selvaggi. Welcome to Hubwonk, a podcast of Pioneer Institute, a think tank in Boston. Earlier this month, the Biden administration announced new tariffs on 18 billion worth of Chinese imports, justifying the action as necessary to protect American industries from overcapacity created by Chinese subsidies.
[00:00:23] The legal and rhetorical justification for targeting China largely mirrors that of the earlier Trump administration. and increases tariffs on electric vehicles, solar cells, batteries, steel, and aluminum as defense against a predatory trade rival. While some critics see this action as the president’s effort to win votes in the swing states of the industrial heartland, others caution that raising tariffs on low cost EVs, solar cells, and batteries would raise their price.
[00:00:53] Thus hindering efforts to shift towards renewable energy and contributing to the persistent inflation complicating the president’s re-election prospects. How does the U. S. design and implement tariffs? What is the scope of this latest round of duties? Who stands to benefit from these protections? And who pays the price when Chinese products become more expensive?
[00:01:18] My guest today is Clark Packard, a research fellow at the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute. As an attorney and economist focusing on federal trade policy, his research examines the effects of tariffs on American industry and the economy. He will share with us the background on the incentives and justifications for implementing tariffs in the past, and discuss how the Biden administration’s recently announced tariffs will likely affect U.S. consumers, related industries, and the nation’s ability to move towards affordable, renewable energy. When I return, I’ll be joined by Clark Packard from the Cato Institute. Okay, we’re back. This is Hubwonk. I’m Joe Selvaggi, and I’m now pleased to be joined by research fellow at the Herbert A. Stiefel Center for Trade Policy Studies at Cato Institute, Clark Packard.
[00:02:08] Welcome to Hubwonk, Clark. Thanks for having me. I’m glad to be here. All right. Well, I’m thrilled to have you here to have a discussion about the recent raft of tariffs announced by the Biden administration. I’ve read, what the tariffs seem to entail, and some of the press releases. Also, some of the reactions to the, to the tariffs.
[00:02:27] So for the benefit of our listeners, I want to explore what the tariffs are, who they’re intended to help, whether you think they’re a fairly good idea and they’re going to achieve their intended purpose. But before we get into the nitty gritty of these particular tariffs, let’s take a step back and talk about tariffs in general for the benefit of listeners who maybe understand slightly a bit about what tariffs are.
[00:02:52] Let’s start at the beginning. What is a tariff? Who gets to impose tariffs? And, we’re going to talk about who ultimately pays those tariffs, but let’s start at the beginning. who decides what countries and what products we, we impose tariffs on?
[00:03:03] Clark Packard: Yeah, that’s a good question. I think to answer that question, It’s the U. S. government decides which countries to impose tariffs on, and there are a number of processes by which they do that. But generally speaking, a tariff is essentially just a tax on imports of any particular product or services even. and so essentially what it does is it’s meant to raise the cost of a foreign product entering the United States to make, to thereby make a domestic product, a similar product, more competitive.
[00:03:36] and, that’s how it works in theory, but there are a lot of questions and I think legitimate concerns about how they work in practice.
[00:03:45] Joe Selvaggi: All right, so we’re talking about products, you can just say products, we’re talking general things, everything from cars and semiconductors, which are, high value products, all the way to commodities such as steel, you could impose a tariff, and as you say, the value of this is to make the foreign product more expensive, therefore make the relative U.S. similar product more expensive, more competitive in theory to benefit U.S. jobs. But in general, let’s say, how do tariffs get sold to either the American public or the American worker or the American voter, if we’re really being precise? What’s the justification for tariffs in the public square?
[00:04:23] Clark Packard: Most of the time, they’re sold as a tool to counteract unfair product, unfairly traded products coming into the country. That is to say, if a foreign government subsidizes the production of a product, The U.S. can use a tariff to counteract that subsidy, that’s not always the case, though.
[00:04:43] There are times where tariffs are imposed for just rank protectionist purposes, that there isn’t an argument about, well, it was unfairly subsidized and then dumped into the U.S. market, which is to say sold below cost, but instead it’s just about protecting the domestic industry and bolstering the domestic industry.
[00:05:06] From foreign competition, and that a lot in the steel industry in particular. There’s a long history of U. S. steel companies begging at the trough for protection from foreign competition. and so you when you go and look at what The price of steel sells on a world market for, it’s about twice as much for a ton of hot rolled band, in the US, as opposed to the rest of the world, because the United States has effectively walled itself off from foreign competition in the steel industry.
[00:05:38] Joe Selvaggi: So, again, we’re not going to point any fingers just yet, but the idea is we may want to punish foreign producers who we see are unfairly, subsidizing or creating an advantage, that a free market doesn’t enjoy. So, we want to, in a sense, punish unfair actors in otherwise free markets. Again, we’re not going to talk about these particular tariffs yet, but historically, who have we targeted? which countries? you mentioned steel as a product that we protect, here, but steel comes from everywhere, Canada even. What countries have been the target of tariffs in the past?
[00:06:10] Clark Packard: It’s, it tends to be China, a lot of the anti-dumping and countervailing duties, that is to say the tariffs that we use to counteract unfairly traded products, come from China. I would also say that the United States has a tendency to target low wage countries, developing countries but again, mostly these. The tariffs and trade remedies tend to target China. That’s not, again, not exclusively. There are plenty of trade remedies and tariffs on products that originate in the EU, for example. But again, it tends to be developing countries, in particular China.
[00:06:50] Joe Selvaggi: And you mentioned steel as one of the products that we tend to want to protect. But what about, what are some of the other industries besides steel that we’ve tried to, let’s say, use tariffs to either protect or punish unfair actors?
[00:07:02] Clark Packard: Yeah, there’s a long history of automobile tariffs, there’s a long history of, restricting the imports of sugar, through not necessarily a tariff, but a quota, the amount that we can import is capped, on foreign sugar entering the United States, which again has led to, essentially, sugar in the United States is twice as expensive as it is in most other parts of the world. Historically, it’s been those industries that were located in politically sensitive areas, the Midwest, for example, the steel and automotive industry is largely located in the Midwest. and so, I think you can draw, some conclusions from that, which is to say that we, again, a lot of this is driven by politics and those areas that are, Important to win for political purposes. and I think, again, that might be smart politics, but, raising the price of steel by twice, is maybe not the best thing if you’re trying to bolster domestic manufacturing in the United States. so, again, these things have a tendency to ripple throughout the economy, but again, I think a lot of its driven by politics.
[00:08:13] Joe Selvaggi: Indeed. And you mentioned steel and sugar. These are products, but of course they’re inputs for other products, which everything made from those products becomes more expensive. But I want to get even more fundamental and say, when we look at tariffs, as you mentioned, it makes foreign products more expensive.
[00:08:29] Effectively, the product here in the U.S., you mentioned steel twice as expensive, sugar twice as expensive. The notion, I think, for the average casual observer of tariffs, they imagine the Chinese or whomever produces cheap sugar paying these tariffs as if it’s a tax on the Chinese. Of course, what we’re doing is we’re taxing the product that an American buys. So, again, I don’t want to put more words in your mouth, but who pays a tariff if ultimately it makes a U. S. Consumer’s product more expensive, isn’t it the U.S. consumer that’s paying all tariffs?
[00:09:02] Clark Packard: Yeah, that’s exactly right. So, there are two, two questions, built into yours, which is, first of all, the legal, the question of who legally pays the tariff that is legally required to be paid by the importer, the importer of record, but the more fundamental economic question is what’s the incidence of the tariff?
[00:09:22] That is to say, who actually pays the tariff? Ultimately, and I think that it’s pretty clear that tariffs are borne by U. S. consumers. we had a grand experiment in this during the Trump administration. In the New York Federal Reserve and economists at Princeton, among other economists have studied the incidents of the Trump tariffs and found that it was almost 100 percent pass through.
[00:09:47] That is 100 percent of the cost of the tariff was borne by Either a consumer buying the product or sometimes the, the business that, that imported the input or whatever, basically swallowed the cost and accepted, smaller profit, profit margins or what have you, but ultimately the academic literature on this is pretty clear that the American public, in one way or another, paid the Trump tariffs. That’s not to say that it doesn’t hurt foreign producers, it does, but ultimately the cost is borne by Americans.
[00:10:25] Joe Selvaggi: And I also, again, to beat this to death here, if I buy a Chinese product that has a tariff on it, I ultimately pay the tariff because it’s been made more expensive by the tax, which has been passed to me.
[00:10:35] But if the alternative American product that it’s competing with is also more expensive, whether I buy the Chinese product or the U. S. product, I’m paying the tariff. For the tariff, meaning if the, I would imagine if I tax the heck out of my competition from China and force consumers to buy U.S. products, those U. S. products, because they’re not facing true competition, but rather contrived competition, those U.S. products are more expensive. Now, maybe you might say, oh, I’m okay spending more for a U.S. product, but ultimately, I pay the tariff whether I buy the Chinese or the American product. Am I going on a limb here?
[00:11:06] Clark Packard: No, I think that’s exactly right. And this gets into what we, in the economics world, talk about, which is stated preference versus revealed preference. People talk about, well, I’m willing to pay extra to buy an American product and support local producers. but then, the data’s pretty clear that people may say that, but they don’t actually do that in reality.
[00:11:29] I think people are cost conscious, especially in a time with relatively high inflation. and so, I think that it’s pretty clear that people are willing to pay maybe a little bit more to have something domestically made, but not exorbitantly more, for a product that’s domestically made. And so, Yeah, I think there are legitimate questions about how effective tariffs tend to be.
[00:11:54] Joe Selvaggi: Now, again, we’re talking about the fact that these tariffs make, of course, foreign products more expensive here. It makes the American product less; I say more expensive because it doesn’t face true competition.
[00:12:05] But ultimately, we live in a big world. I like to remind people on this podcast, 24 out of every 25 people on earth are not American. It’s a big wide world out there, 8 billion people, all buying products. If our products are both, produced with, steel that’s, inflated in price, therefore our American made products are more expensive, both to us, but to anybody we sell it to, it could be to the sugar too. American Twinkies are going to be more expensive out abroad because the sugar made. Used to make those Twinkies is more expensive. If ultimately, again, we’re getting off track here, but if we want to be competitive, meaning we want our trade deficit to be competitive, we want everybody to buy U.S. products, aren’t tariffs ultimately like shooting yourself in the foot by making U.S. products fundamentally more expensive?
[00:12:47] In the global trade universe, again, we’re a little far afield, I’m going to bring it back, but go with me there.
[00:12:53] Clark Packard: Yeah, I think that’s exactly right. if you look at, it’s something between 50 and 60 percent of all imports into the United States are either capital goods or raw materials, intermediate inputs that American firms use to make products here and then export them abroad and also serve the U.S. domestic market. a tariff might have worked in a less globalized world, but given how interconnected everything is these days, and how supply chains in particular are globalized all around the world and they’re very efficient, you make yourself less globally competitive by imposing tariffs on capital goods and intermediate inputs, the stuff that you use, American citizens. Producers use to make the stuff that they’re making and sell, both again, both domestically and abroad.
[00:13:46] Joe Selvaggi: Yeah. again, I, so that we don’t appear to be somehow partisan, we’re going to be talking about the Biden administration’s recent tariffs, but of course this, the rhetoric of, let’s say the Trump administration, the whole, I characterize it, the big category of China is eating our lunch by imposing tariffs on products coming from China, which are many, in many cases, inputs and ultimately the effect is to make U.S. Products more expensive and less competitive. Ultimately, by imposing tariffs on China to combat them eating our lunch, is effectively eating our own lunch. Which is to say, we’ve shot ourselves in the foot by making products, in general with tariffs for U.S. more expensive abroad. And then we’ll move on, but I just want to put a fine underline in there.
[00:14:29] Clark Packard: Yeah, I think that’s exactly right. that, but to be clear, I do think the Trump administration correctly diagnosed a lot of the problems. Like, I’m not here to defend certain Chinese industrial policy practices and heavy intervention, I just have very serious concerns about the sort of remedies that, that, President Trump, as well as now President Biden, have imposed to deal with the unfair trade practices coming from China and again, I’m happy to get into all of that as we discuss the EB tariffs and all that.
[00:15:02] Joe Selvaggi: And for the benefit of the listeners, I am not taking the position that China is a free trader and, a good actor here. I might argue that free trade works even when the other guy’s a bad actor, but that’s perhaps worthy of an entirely, different, podcast.
[00:15:16] So let’s do this. Let’s shift our conversation from tariffs in general to these particular tariffs that were just announced earlier this month by the Biden administration. First questions first, how is it that the man in the Oval Office is imposing tariffs? I thought this would be something that, our, yeah, for Article 1, people would be doing. Congress would be deciding, this is a very complex issue. Wouldn’t we want Congress to decide which tariffs to impose on which countries?
[00:15:39] Clark Packard: Yeah, that’s a good question. for most of American history, It would have been handled through Congress from basically the founding of the country to the mid-1930s.
[00:15:50] Congress set individual tariff rates. But beginning in the 1930s, Congress began delegating that authority to the executive branch on the assumption that the executive branch would be less powerful. So, I hope that was, I hope it was parochial and more open to global trade, and better able to balance competing interests, as opposed to the traditional log rolling, that you saw in Congress that led to the famous, I guess infamous, Smoot Hawley tariffs in the early 1930s.
[00:16:20] Those tariffs, for history, economic history buffs like me, were pretty clearly detrimental and helped prolong the Great Depression and deepen the Great Depression. And so, so, yeah, I think that it’s an excellent question because you’re exactly right. Article 1, Section 8 of the United States Constitution gives to Congress the authority to regulate commerce with international or with foreign nations.
[00:16:45] But again, though, I think, maybe a series of good faith, arguably mistakes, Congress has delegated that authority to the, to Congress. Executive branch, and that’s where we are now.
[00:16:59] Joe Selvaggi: So, the basis again, as I’ve read it, is they use section 301, which is a particular section of the, of, power, for, to impose tariffs based on unfair actions, from competing nations. So, we’re by virtue of the fact we’re using the section, we’re saying we’re doing it for the sole purpose or to combat unfair actions. I think this was a sort of a dusty old way of doing things, asserting that there are unfair actions. I think we have since come up with better ways of combating unfair practices.
[00:17:30] But this is something both now, of course, Biden has done it, but he’s really using it as something that Trump had done, maybe five, six years ago, using the same justification. Share with our listeners, what is this 301 and why did we dust it off, take it off the shelf and dust it off for this new raft of tariffs?
[00:17:45] Clark Packard: Yeah, it’s an excellent question. So, you’re right. The Biden administration is using Section 301 of the Trade Act of 1974, which allows the U.S. government to investigate and attempt to remedy quote unquote unfair actions and policies taken by foreign governments that violate U. S. trade agreements or unreasonably violations Burden U.S. Commerce.
[00:18:08] The statute is designed to create leverage to pry open foreign markets, by forcing the targeted governments to remove the offending measures. So, if you go back, the Biden administration is using the same investigation that the Trump administration used. which revolved around Chinese abuse of intellectual property and again, I thought that was a fairly compelling argument that the Trump administration made. I think it’s pretty clear that China does engage in the abuse of intellectual property to the detriment of American producers and ultimately American workers. and so as the review of those tariffs, statutorily mandated review, the Biden administration took those.
[00:18:51] That investigation and said, okay, now we’re going to extend these tariffs. And dramatically raised the rate to, let’s say, on electric vehicles, for example, they quadrupled the rate of the tariff from 25%, which was already very high, to 100%.and, I, ultimately the Biden administration is justifying this on national security grounds, but that’s a very different argument than, China engages in the abuse of intellectual property.
[00:19:23] I think both, you could make a case for both, but that’s, it’s incongruent the way, on one hand, they’re using a statute designed to combat intellectual property abuse.to now say, well, the importation of electric vehicles from China poses a national security risk to the United States. And I’m a lawyer, and so I have very serious statutory concerns, and I’ve said this publicly that if you want to go down this road, there was a right way to do this.
[00:19:54] There is a statute that gives the executive branch the authority to restrict imports in the name of national security. That’s the route you should have gone down, not trying to pigeonhole this into an argument about intellectual property and IP abuse.
[00:20:09] Joe Selvaggi: So, there’s no new allegations that China has suddenly, again we’re going to talk about the products that we’re imposing, you mentioned EVs, there’s no sort of allegation that suddenly China has taken U.S. EV, electronic, electric vehicle technology and stolen it and used that stolen technology to make cheaper vehicles. There’s no such allegation that Biden has not justified any of these with that particular 301 clause. style, accusation. There’s nothing new has come to light.
[00:20:39] Clark Packard: Yeah, that’s basically right. Again, the New York Times quoted senior administration officials saying, we firmly believe this is a national security risk. We’re concerned about data, from being transferred from, an American consumer driving around a Chinese EV. you and transmitting that data back to the Chinese Communist Party in Beijing.
[00:20:59] And again, if the U.S. wants to make that argument, I would look at that in good faith and, judge it on the merits. But at this point, that’s not what they’re arguing. I think what they’re doing is they’re doing this for political expediency. That is to say, we have this, uh, statutory, statutorily mandated review of the Trump tariffs.
[00:21:18] Thank you very much. We’re required to do it. We can adjust tariffs, under that authority, so we think it gives us carte blanche, to do this, and I’m skeptical because I think that erodes the rule of law, ultimately, which is one of the things that, that makes the United States such a, compelling country.
[00:21:35] The other place to invest for foreigners is that there’s very strong protection for the rule of law. We have a way of ensuring that the processes are taken care of according to the books, and it’s not just rank politics like you see in China, where might makes right and whatever the Chinese Communist Party wants. Ultimately is what happens. and so, yeah, I have a concern that it does erode the rule of law.
[00:22:01] Joe Selvaggi: Yeah, indeed. It reminds me that using the HEROES Act to forgive student debt, it, it just, it doesn’t pass the laugh test. So, let’s get into this, the tariffs on the cars. I will forgive our listeners if they will say that despite the fact that China makes more, Electric vehicles in any other country on earth.
[00:22:17] We don’t see too many of them because I don’t think we have any. I think my last is less than 1%.so we’re importing about 1 percent of the, Chinese electric vehicles. And yet we’ve decided to target them going from 25%, which You know, I don’t know the numbers, but makes it prohibitively expensive, 25%, going to 100%, which makes it, no, no producer could have 100 percent tax on their product and sell. So, what’s the logic of targeting a product that we don’t even use yet anyway? Is there any?
[00:22:46] Clark Packard: Yeah, their argument is, if we don’t get ahead of the curve, we face a massive shock of imports flooding the U. S. market, because that’s what Europe is seeing right now. Europe has experienced a deluge of Chinese EVs into various EU countries.
[00:23:06] And it’s a shock to the system, and producers in the EU are struggling to adjust. So, so the Biden administration is saying, we need to get ahead of this thing, and so we’re going to just basically wall off the United States from Chinese EVs. I think, like you mentioned, that very few EVs from China end up in the United States.
[00:23:26] It’s, like you said, it’s 1 percent of the U.S. EV market. But ultimately, I think this is mostly driven by politics. if you think about it, right, Donald Trump is promising a 60 percent across the board tariff on all products. Coming from China and a 10 percent tariff on all products coming from countries that are not China, so every other country in the world and so the Biden administration is trying to appeal, to a pretty narrow slice of voters in the Midwest, particularly, unionized auto workers. And say, saying, okay, we’re going to, do something pretty serious and severe to restrict foreign competition, and specifically target the Chinese, and so we’re going to announce 100 percent tariff.
[00:24:16] Shortly after they were announced, Donald Trump came out and said, well, I would impose a 200 percent tariff on imports of electric vehicles from China. At that point, it’s just silly. It doesn’t really matter if it’s 100 percent or 150 percent or 200%. None of those cars are entering the United States either way.
[00:24:33] Joe Selvaggi: I’m curious, though, again, this is a little sidetrack, if we take the sort of the rhetoric of the Biden administration wanting us all to be in electric vehicles, and given that the market is such that, sure, there are electric vehicles here, so like Tesla’s and actually Mercedes Benz and the, expensive, very expensive electric cars, very few inexpensive electric cars, so even if a person of modest means wants an electric car, they can’t afford it.
[00:24:56] So, essentially, this is making it very difficult for the U.S. to embrace the universal acceptance of electronic vehicles. We’re essentially, the policy seems in tension with itself. You can’t have everyone buy electric cars and then say, point them to the Tesla dealer. It’s just not possible.
[00:25:13] We’re, this tariff effectively, by banning, inexpensive, Electric vehicles from China, you’re essentially saying to the 90 percent of the car market, sorry, stick with your internal combustion engine car, right?
[00:25:24] Clark Packard: Yeah, that’s exactly right. I think that this is another example where when they’re, the Biden administration’s goals to If you take those three at a time, the folks who.
[00:25:33] Stand up a boost domestic manufacturing conflict with its stated goals on. Climate change, and like you said, embracing a transition. to a cleaner, functioning automobile. they’re always siding with. Domestic producers at the expense of their stated climate goals, because like you said, the tariffs will stump the deployment of EVs, and like maintaining solar tariffs, anytime, again, anytime a climate goal conflicts with a domestic manufacturing goal, the administration seems to side with manufacturing, and that’s not just the U.S. government. The Biden administration, the Trump administration did the same thing, although they didn’t have the same sort of stated climate goals, that the Biden administration has, but ultimately the last two administrations have bent over backwards to quote unquote protect a very narrow slice of the climate agenda.
[00:26:31] Manufacturing, domestic manufacturing industry. but yeah, I think it ultimately hurts the environment, again, much like a solar tariff. I’m of the opinion that it doesn’t really matter where a solar panel is made. If you firmly believe that climate change is, poses a systemic risk to the future of the world, then we should embrace very cheap, very rapidly deployable, technologies like Cheap solar panels from Indonesia and Vietnam and China.
[00:27:04] Joe Selvaggi: Right, it seems, either disingenuous or, if you believe what you say, as you say, if climate is the threat that most many say it is, We should not care where it comes from. I want to also talk about steel. It seems interesting to me, the justification for renewed steel tariffs is we want to use American clean steel.
[00:27:24] This is a new phenomenon. I wasn’t aware that we’re that much cleaner when we produce our steel. But again, the same logic obtains if we put a tax on Chinese steel that’s dirty, and only use American steel that’s clean, but that steel is more expensive and is an input to all U. S. products, cars, you name it. That makes those products more expensive, less sellable to the world. Again, it’s a big world. that means Chinese products become more competitive because plenty of places are happy to buy dirty steel from China and dirty steel products from China. Don’t we essentially make the world much dirtier by trying to, tax our way away from dirty Chinese steel?
[00:28:05] Clark Packard: Yeah, that’s right. And I’ve always said, I think it is pretty clear that the United States produces cleaner steel than China, but there are parts of Germany, for example, that produce cleaner steel than the United States. So should we be subsidizing the United States? The importation of steel from Germany, right?
[00:28:22] Like you can play these rhetorical games. but yeah, ultimately, I think you’re right. You tend to shoot yourself in the foot when you try to, play chess master, and dictate where global markets are going. I think demand would ultimately, be such that, there would be, Again, demand for cleaner steel, but the U.S. government sort of putting its thumb on the scale, I don’t think it has the best history of kind of picking and choosing, that. and again, I do think it ultimately undermines stated climate goals.
[00:28:52] Joe Selvaggi: And again, just double back to the solar panels. I think batteries, battery components, all kinds of things that go into electric products that are alternative to, let’s say, combustion engines, by making those more expensive, we make sure that we virtually guarantee that the uptake will be slower. People will have fewer solar panels, fewer electric cars with batteries, fewer electrified things if it’s more expensive. So effectively, we’re making the world dirtier with these tariffs, perhaps for good intentions, but perhaps misguided intentions. How about this weird thing about ship to shore cranes? I don’t understand this, so this doesn’t fall into any bucket. I’m curious what your view, as someone who studies this topic deeply, what is the logic of tariffs on ship to shore cranes?
[00:29:38] Clark Packard: I frankly, I don’t understand it. I think it’s that, that, the U.S. ports are pretty in dire shape, I would say. and there, there’s a concern that, oh, these products are being unfairly traded in the United States. But again, if you are serious about making sure we have the most competitive ports, and they’re dredged appropriately, and for deep enough purposes so that cargo ships can come in and out, it makes little sense to target it.
[00:30:07] Again, an input that, that we use to facilitate commerce. It’s, what kind of ship to shore crane production manufacturing is taking place in the United States? Is it that large of a constituency that, that we really need to protect that? I don’t know. but I, my, my assumption would be no.
[00:30:28] Joe Selvaggi: So, if there’s any argument for, whatever we want to call this. And the last thing we’re talking about, I’ll call it protectionism or tariffs or hostility towards foreign products. If there’s any justification that persuades me, it’s national security. And I think that was carted in, we mentioned in EV somehow, a Chinese electric vehicle is going to be like a moving TikTok account that’s going to transmit where you are going to the grocery store and that’s going to be some sort of strategic advantage China might have.
[00:30:54] As absurd as that is, I can’t imagine legitimate concerns about things like semiconductors or medical products that, God forbid, another pandemic or, armed conflict with China. We don’t want all our semiconductors to be coming from a place that. We’re in global competition. I don’t know if it winds up being confrontation, isn’t it just a national security issue to ensure we have the medicine and the chips that we need, God forbid, if there’s a conflict in the future?
[00:31:21] Clark Packard: Yeah, I think that’s right, right? I’m an adamant free trader. I’m a Cato, crazy Catoite, as they say, but even I would acknowledge Milton Friedman, one of my heroes, Adam Smith, all recognize that there is a national security exception, but I tend to think that national, the national security exception Has a history of swallowing, the rule, and basically becoming a protectionist cudgel, right?
[00:31:45] So, so the Trump administration in 2018, 2017, 2018, imposed national security tariffs on imported steel, including from countries like NATO allies, Israel, Canada, under no sort of rational argument is Canadian rebar a national security threat to the United States. So, again, I’m very skeptical about how this plays out.
[00:32:12] takes place in reality. but again, I, my hope is that ultimately Congress would more tightly define what it, what national security means such that we could ferret out, bogus claims about Canadian steel being a national security risk and focus on, again, I think there are compelling arguments, on semiconductors in particular.
[00:32:35] I’ve written, multiple times that I think some trade with China needs to decline. but I think that the overwhelming majority is doesn’t impose or impose any national security risk or doesn’t. Result in sort of one sided dependencies, but the semiconductor example is exactly right.
[00:32:53] I think that there are ways we need to be more circumspect about Chinese chips in the United States, and we need to be more circumspect about exporting chips to China. but ultimately, the administration’s export controls, I think, were way too broad. I think you can make a compelling case to, to restrict the sales of tip top upper echelon chips coming from the United States to China.
[00:33:16] That maybe makes perfect sense that, hey, this could be used in a weapon that could ultimately be turned around on us. but ultimately, I think a lot of this is just rank protectionism, and my hope is over the Again, we can get a tighter definition. of national security so that we can ferret out legitimate claims and separate out legitimate claims from more bogus claims.
[00:33:38] Joe Selvaggi: Well, you had, I appreciate you making the self-deprecating, Maketo nut. One of the reasons I love to have Maketo guests on the podcast is because you don’t have, one doesn’t have a party allegiance, one, one can still be wrong, but not for, party loyalty, as a reason. But now we’re facing in November an election, and we’ve made very clear in our conversation that both candidates seem to be very tied to out tariffing each other, if I’ve invented a new word.
[00:34:06] Nobody seems to advocate for what I believe the benefits of free trade, which are benefits for everyone. All of us are consumers. We all would like less expensive products. We all should invite competition from the world, because Well, it’s still easier and better to make things here, we, our manufacturing, we still produce 26 percent of everything made in the world, even though we’re 4 percent of the world’s population, we’re doing just fine, but let’s play this out. If both candidates are pro protection, pro tariff, where will the free trade advocates come from? Are there any out there in the wilderness? or is the battle lost to this, these rhetorical flourishes of, People before profits or whatever the slogan is today.
[00:34:48] Clark Packard: Yeah, it’s an excellent question. Trade is the one issue that is almost unanimous among economists. If you look at the University of Chicago, they do these polls of economists. Do you think this tariff makes sense? Yes, or no? And why? And explain your rationale and what’s your intensity level on a one to 10 basis. and basically, it’s like 95 percent of all professional economists believe that And I think this is something that economists argue in favor of free trade.
[00:35:16] Again, you can find economists that support higher taxes and lower taxes and more regulation, less regulation. But when it comes to trade truly is the one issue that sort of unites economists. But that’s an interesting point. It’s a sort of predicament where it’s like, okay, the professionals who study this all the time are isolated, and detached from the policymaking world.
[00:35:39] I ultimately think that there are enough folks who get it in Congress and the administration. I think, the Biden administration is pretty well split between, more protectionist folks. And then, people like. Janet Yellen, the Treasury Secretary. She knows deep down that a lot of these tariffs are ill conceived, but ultimately has to give way to political, factors, overriding the economics.
[00:36:03] So, I’m pessimistic in the short run, but my hope is that we can get back and maybe the protectionist fever will break, and we can get back to this, for about 75 years, there was a bipartisan consensus in favor of open trade, in the United States. And again, that was Republicans and Democrats for 75 years, up until 2016 with President, Trump.
[00:36:26] And then now, continuing into the Biden administration. So, my again, my hope is over the long term, we can get back to that. That preexisting bipartisan consensus in favor of relatively open trade. That’s not to say we’ll ever get into a position like Cato would prefer where the United States just unilaterally drops all of its tariffs, irrespective of what foreign countries do. Ultimately, that’s right on the economics, but not really practical. So, I think, the United States getting back in the business of negotiating more free trade agreements, I think, would be good. but my hope is maybe in the medium run, maybe in the next five years, maybe the, hopefully the fever will break.
[00:37:04] Joe Selvaggi: Yeah, one hopes. I like that. You’re planning for the long term. I thought the participants of the digital science know that in the long run, we’re all dead. All right. Well, I appreciate you coming on the show and sharing your wisdom with us. I appreciate your reading and writing your research. where can our listeners, read more of your work, at Cato and elsewhere where you’re doing your research and putting out some, I think, very persuasive pieces on the merits and virtue of free trade.
[00:37:32] Clark Packard: Thanks. Yeah, Cato.org. And then, I’m on Twitter. It’s, at Clark underscore Packard, P A C K A R D. and I tend to tweet most of the things I write. So, yeah, those are both good places to, to see it. See if I’m, what I’m arguing makes sense.
[00:37:48] Joe Selvaggi: Right, well, again, if someone’s hardcore protectionist, I’m not sure a half hour with a conversation is enough to persuade them, but perhaps some more in-depth reading will, will get them going. So, if we’ve piqued their interest, we’ve done something here. So, thank you very much for joining me today, Clark. You’ve been a great guest and I really appreciate you taking the time with us. Thank you. Well, thanks again, and thanks for the invite. This has been another episode of Hubwonk. If you enjoyed today’s show, there are several ways to support Hubwonk and Pioneer Institute.
[00:38:17] It would be easier for you and better for us if you subscribed to Hubwonk on your iTunes Podcatcher. It would make it easier for others to find us if you offer a 5 star rating or a favorable review. We’re of course grateful if you share Hubwonk with friends. If you have ideas or comments or suggestions for me about future episode topics, you’re welcome to email me at hubwonk@Pioneerinstitute.org. Please join me next week for a new episode of Hubwonk.
Joe Selvaggi talks with international tax and trade expert Clark Packard about the tension between the economic and political calculus behind the Biden administration’s recently announced tariffs on Chinese products, including EVs, batteries, and steel.
Guest:
Clark Packard is a research fellow in the Herbert A. Stiefel Center for Trade Policy Studies. Prior to joining the Cato Institute, Packard was a resident fellow at the R Street Institute, focusing on international trade policy. He previously worked at the National Taxpayers Union doing the same. Prior to those roles, he served as an attorney and policy adviser to two South Carolina governors. Earlier in his career, he spent three years in private legal practice. Packard is a contributor to Foreign Policy and has written for National Review, Lawfare, The Bulwark, Business Insider, The National Interest and other publications. He has appeared on a number of television and radio programs to discuss international trade policy. He is a graduate of the University of South Carolina School of Law.
“She’s a good girl. She helps me a lot. She has big, big dreams. I don’t have the money, but she has big dreams. I hope she’s going to get everything, but she works so hard. She works so hard in school.”
“Our family is needing to make some really big sacrifices because we believe this is important, and so, we’re basically going to do whatever it takes… Sometimes we look at each other and go ‘I don’t know if I can do it again another month…’”
“A lot of the families have to sacrifice and work multiple jobs… And just scraping together enough money to just make tuition, just the basics.”
“It is discriminatory, that parents who want to choose an alternative to public school for their children, would not in any way receive any compensation for that, whether it be tax credit, whether it be a voucher…”
In the 1840s, nativist movement leaders formed official political parties and local chapters of the national Native American Party (later the American Party), although they continued to be commonly known as the Know-Nothing Party. Politicians sought to insert provisions into state constitutions against Catholics who refused to renounce the pope. The Know-Nothing movement brought bigotry and hatred to a new level of violence and organization.
The party’s legacy endured in the post-Civil War era, with laws and constitutional amendments it supported, still today severely limiting parents’ educational choices. A federal constitutional amendment was proposed by Speaker of the House James Blaine prohibiting money raised by taxation in any State to be under the control of any religious sect; nor shall any money so raised or lands so devoted be divided between religious sects or denominations. These were then named the Blaine Amendments of 1875.
in recent decades, often in response to challenges to school choice programs, the U.S. Supreme Court has demonstrated great interest in examining the issues of educational alternatives and attempts limit parental options. Massachusetts plays a key role in this debate. The Bay State was a key center of the Know-Nothing movement and has the oldest version of Anti-Aid Amendments in the nation, as well as a second such amendment approved in 1917. Two-fifths of Massachusetts residents are Catholic, and its Catholic schools outperform the state’s public schools, which are the best in the nation.
Communities with vibrant entrepreneurial ecosystems more likely to prosper
BOSTON – The prevalence of entrepreneurship is linked to both the regulatory environment and the portion of foreign-born immigrants in a jurisdiction, according to a new study published by Pioneer Institute.
“Jurisdictions with vibrant entrepreneurial ecosystems prosper, while those without them decay,” said Joshua Bedi, author of Open for Business? Entrepreneurship, Regulations, and Immigration in New England and Beyond. “The defining characteristics of jurisdictions with strong entrepreneurial climates are low regulatory burdens and high concentrations of immigrants.”
Bedi finds that the regulatory characteristics most conducive to entrepreneurship are:
Massachusetts and Connecticut have environments that are slightly less burdensome than average, which may account for both having levels of entrepreneurship that have been above the national average for more than 50 years. The impact is even greater in New Hampshire, which has the nation’s least burdensome regulatory environment.
The 20 Massachusetts communities with the lowest tax rates have 15 percent more start-ups per capita and four times more “growth events” per capita than the 19 communities with the highest tax rates.
Bedi measures entrepreneurship as new for-profit business registrants per capita. To capture the most innovative and impactful types of entrepreneurship, he uses a narrower metric: high-value acquisitions of large companies and initial public offerings (IPOs) per capita. While the overall amount of entrepreneurship increased between 2000 and 2015, high-pact entrepreneurship has declined both in Massachusetts and nationally.
There is also a strong correlation between the portion of foreign-born and entrepreneurial activity. Immigrants are more likely to be self-employed than native-born individuals irrespective of educational attainment.
A 1 percent increase in the share of the state population that is composed of immigrants correlates with a 24 percent increase in startups per capita. The increase jumps to 42 percent per capita for high-value acquisitions and IPOs.
Vermont is the New England outlier to the correlation between immigrants and entrepreneurship. Bedi suggests that may be because of the state’s combination of harsh regulation and a low proportion of immigrants.
Among Bedi’s recommendations are that municipalities should streamline the steps required to start a business. He notes that starting a restaurant in Boston requires 92 steps that involve 9 city agencies. Other cities have reduced this to 35 steps.
Bedi also recommends that cities establish an online portal that would allow potential entrepreneurs to log in and navigate necessary paperwork and approvals.
He urges states to incentivize mobility by refusing to enforce non-compete agreements between employers and employees, eliminate occupational licenses that don’t protect public safety, and to advocate for comprehensive federal immigration reform.
Joshua Bedi earned his Ph.D. and was a Mercatus Center Fellow at George Mason University. He is now working at Copenhagen Business School as a Postdoc in Entrepreneurship at the Department of Strategy and Innovation, where he works under the Mærsk McKinney Møller Chair in Entrepreneurship.
This week on The Learning Curve co-hosts U-Arkansas Prof. Albert Cheng and DFER’s Alisha Searcy interview Henry James biographer Sheldon Novick. Mr. Novick discusses the complexities of Henry James’ life and writing career, highlighting his significant literary contributions, the influence of his family’s intellectual legacy, and the realistic portrayal of social tensions in his works. Novick explores Henry James’ life experiences that shaped his novels like The Portrait of a Lady and The Golden Bowl. He shared more on James’ important friendships, particularly with the novelist Edith Wharton, emphasizing James’ enduring influence on modern fiction. In closing, Novick reads a passage from his biography Henry James.
Stories of the Week: Albert shared an article from USA Today discussing state cell phone bans in schools; Alisha reviewed an article from Real Clear Education about how parents picking their children’s schools shouldn’t be a crime.
Guest:
Sheldon Novick is the author of the two-volume biography, Henry James: The Young Master and Henry James: The Mature Master; as well as Honorable Justice: The Life of Oliver Wendell Holmes; and the editor of The Collected Works of Justice Holmes.
Tweet of the Week:
Click here to read a transcript
[00:00:00] Joe Selvaggi: This is Hubwonk. I’m Joe Selvaggi. Welcome to Hubwonk, a podcast of Pioneer Institute, a think tank in Boston. Earlier this month, the Biden administration announced new tariffs on 18 billion worth of Chinese imports, justifying the action as necessary to protect American industries from overcapacity created by Chinese subsidies.
[00:00:23] The legal and rhetorical justification for targeting China largely mirrors that of the earlier Trump administration. and increases tariffs on electric vehicles, solar cells, batteries, steel, and aluminum as defense against a predatory trade rival. While some critics see this action as the president’s effort to win votes in the swing states of the industrial heartland, others caution that raising tariffs on low cost EVs, solar cells, and batteries would raise their price.
[00:00:53] Thus hindering efforts to shift towards renewable energy and contributing to the persistent inflation complicating the president’s re-election prospects. How does the U. S. design and implement tariffs? What is the scope of this latest round of duties? Who stands to benefit from these protections? And who pays the price when Chinese products become more expensive?
[00:01:18] My guest today is Clark Packard, a research fellow at the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute. As an attorney and economist focusing on federal trade policy, his research examines the effects of tariffs on American industry and the economy. He will share with us the background on the incentives and justifications for implementing tariffs in the past, and discuss how the Biden administration’s recently announced tariffs will likely affect U.S. consumers, related industries, and the nation’s ability to move towards affordable, renewable energy. When I return, I’ll be joined by Clark Packard from the Cato Institute. Okay, we’re back. This is Hubwonk. I’m Joe Selvaggi, and I’m now pleased to be joined by research fellow at the Herbert A. Stiefel Center for Trade Policy Studies at Cato Institute, Clark Packard.
[00:02:08] Welcome to Hubwonk, Clark. Thanks for having me. I’m glad to be here. All right. Well, I’m thrilled to have you here to have a discussion about the recent raft of tariffs announced by the Biden administration. I’ve read, what the tariffs seem to entail, and some of the press releases. Also, some of the reactions to the, to the tariffs.
[00:02:27] So for the benefit of our listeners, I want to explore what the tariffs are, who they’re intended to help, whether you think they’re a fairly good idea and they’re going to achieve their intended purpose. But before we get into the nitty gritty of these particular tariffs, let’s take a step back and talk about tariffs in general for the benefit of listeners who maybe understand slightly a bit about what tariffs are.
[00:02:52] Let’s start at the beginning. What is a tariff? Who gets to impose tariffs? And, we’re going to talk about who ultimately pays those tariffs, but let’s start at the beginning. who decides what countries and what products we, we impose tariffs on?
[00:03:03] Clark Packard: Yeah, that’s a good question. I think to answer that question, It’s the U. S. government decides which countries to impose tariffs on, and there are a number of processes by which they do that. But generally speaking, a tariff is essentially just a tax on imports of any particular product or services even. and so essentially what it does is it’s meant to raise the cost of a foreign product entering the United States to make, to thereby make a domestic product, a similar product, more competitive.
[00:03:36] and, that’s how it works in theory, but there are a lot of questions and I think legitimate concerns about how they work in practice.
[00:03:45] Joe Selvaggi: All right, so we’re talking about products, you can just say products, we’re talking general things, everything from cars and semiconductors, which are, high value products, all the way to commodities such as steel, you could impose a tariff, and as you say, the value of this is to make the foreign product more expensive, therefore make the relative U.S. similar product more expensive, more competitive in theory to benefit U.S. jobs. But in general, let’s say, how do tariffs get sold to either the American public or the American worker or the American voter, if we’re really being precise? What’s the justification for tariffs in the public square?
[00:04:23] Clark Packard: Most of the time, they’re sold as a tool to counteract unfair product, unfairly traded products coming into the country. That is to say, if a foreign government subsidizes the production of a product, The U.S. can use a tariff to counteract that subsidy, that’s not always the case, though.
[00:04:43] There are times where tariffs are imposed for just rank protectionist purposes, that there isn’t an argument about, well, it was unfairly subsidized and then dumped into the U.S. market, which is to say sold below cost, but instead it’s just about protecting the domestic industry and bolstering the domestic industry.
[00:05:06] From foreign competition, and that a lot in the steel industry in particular. There’s a long history of U. S. steel companies begging at the trough for protection from foreign competition. and so you when you go and look at what The price of steel sells on a world market for, it’s about twice as much for a ton of hot rolled band, in the US, as opposed to the rest of the world, because the United States has effectively walled itself off from foreign competition in the steel industry.
[00:05:38] Joe Selvaggi: So, again, we’re not going to point any fingers just yet, but the idea is we may want to punish foreign producers who we see are unfairly, subsidizing or creating an advantage, that a free market doesn’t enjoy. So, we want to, in a sense, punish unfair actors in otherwise free markets. Again, we’re not going to talk about these particular tariffs yet, but historically, who have we targeted? which countries? you mentioned steel as a product that we protect, here, but steel comes from everywhere, Canada even. What countries have been the target of tariffs in the past?
[00:06:10] Clark Packard: It’s, it tends to be China, a lot of the anti-dumping and countervailing duties, that is to say the tariffs that we use to counteract unfairly traded products, come from China. I would also say that the United States has a tendency to target low wage countries, developing countries but again, mostly these. The tariffs and trade remedies tend to target China. That’s not, again, not exclusively. There are plenty of trade remedies and tariffs on products that originate in the EU, for example. But again, it tends to be developing countries, in particular China.
[00:06:50] Joe Selvaggi: And you mentioned steel as one of the products that we tend to want to protect. But what about, what are some of the other industries besides steel that we’ve tried to, let’s say, use tariffs to either protect or punish unfair actors?
[00:07:02] Clark Packard: Yeah, there’s a long history of automobile tariffs, there’s a long history of, restricting the imports of sugar, through not necessarily a tariff, but a quota, the amount that we can import is capped, on foreign sugar entering the United States, which again has led to, essentially, sugar in the United States is twice as expensive as it is in most other parts of the world. Historically, it’s been those industries that were located in politically sensitive areas, the Midwest, for example, the steel and automotive industry is largely located in the Midwest. and so, I think you can draw, some conclusions from that, which is to say that we, again, a lot of this is driven by politics and those areas that are, Important to win for political purposes. and I think, again, that might be smart politics, but, raising the price of steel by twice, is maybe not the best thing if you’re trying to bolster domestic manufacturing in the United States. so, again, these things have a tendency to ripple throughout the economy, but again, I think a lot of its driven by politics.
[00:08:13] Joe Selvaggi: Indeed. And you mentioned steel and sugar. These are products, but of course they’re inputs for other products, which everything made from those products becomes more expensive. But I want to get even more fundamental and say, when we look at tariffs, as you mentioned, it makes foreign products more expensive.
[00:08:29] Effectively, the product here in the U.S., you mentioned steel twice as expensive, sugar twice as expensive. The notion, I think, for the average casual observer of tariffs, they imagine the Chinese or whomever produces cheap sugar paying these tariffs as if it’s a tax on the Chinese. Of course, what we’re doing is we’re taxing the product that an American buys. So, again, I don’t want to put more words in your mouth, but who pays a tariff if ultimately it makes a U. S. Consumer’s product more expensive, isn’t it the U.S. consumer that’s paying all tariffs?
[00:09:02] Clark Packard: Yeah, that’s exactly right. So, there are two, two questions, built into yours, which is, first of all, the legal, the question of who legally pays the tariff that is legally required to be paid by the importer, the importer of record, but the more fundamental economic question is what’s the incidence of the tariff?
[00:09:22] That is to say, who actually pays the tariff? Ultimately, and I think that it’s pretty clear that tariffs are borne by U. S. consumers. we had a grand experiment in this during the Trump administration. In the New York Federal Reserve and economists at Princeton, among other economists have studied the incidents of the Trump tariffs and found that it was almost 100 percent pass through.
[00:09:47] That is 100 percent of the cost of the tariff was borne by Either a consumer buying the product or sometimes the, the business that, that imported the input or whatever, basically swallowed the cost and accepted, smaller profit, profit margins or what have you, but ultimately the academic literature on this is pretty clear that the American public, in one way or another, paid the Trump tariffs. That’s not to say that it doesn’t hurt foreign producers, it does, but ultimately the cost is borne by Americans.
[00:10:25] Joe Selvaggi: And I also, again, to beat this to death here, if I buy a Chinese product that has a tariff on it, I ultimately pay the tariff because it’s been made more expensive by the tax, which has been passed to me.
[00:10:35] But if the alternative American product that it’s competing with is also more expensive, whether I buy the Chinese product or the U. S. product, I’m paying the tariff. For the tariff, meaning if the, I would imagine if I tax the heck out of my competition from China and force consumers to buy U.S. products, those U. S. products, because they’re not facing true competition, but rather contrived competition, those U.S. products are more expensive. Now, maybe you might say, oh, I’m okay spending more for a U.S. product, but ultimately, I pay the tariff whether I buy the Chinese or the American product. Am I going on a limb here?
[00:11:06] Clark Packard: No, I think that’s exactly right. And this gets into what we, in the economics world, talk about, which is stated preference versus revealed preference. People talk about, well, I’m willing to pay extra to buy an American product and support local producers. but then, the data’s pretty clear that people may say that, but they don’t actually do that in reality.
[00:11:29] I think people are cost conscious, especially in a time with relatively high inflation. and so, I think that it’s pretty clear that people are willing to pay maybe a little bit more to have something domestically made, but not exorbitantly more, for a product that’s domestically made. And so, Yeah, I think there are legitimate questions about how effective tariffs tend to be.
[00:11:54] Joe Selvaggi: Now, again, we’re talking about the fact that these tariffs make, of course, foreign products more expensive here. It makes the American product less; I say more expensive because it doesn’t face true competition.
[00:12:05] But ultimately, we live in a big world. I like to remind people on this podcast, 24 out of every 25 people on earth are not American. It’s a big wide world out there, 8 billion people, all buying products. If our products are both, produced with, steel that’s, inflated in price, therefore our American made products are more expensive, both to us, but to anybody we sell it to, it could be to the sugar too. American Twinkies are going to be more expensive out abroad because the sugar made. Used to make those Twinkies is more expensive. If ultimately, again, we’re getting off track here, but if we want to be competitive, meaning we want our trade deficit to be competitive, we want everybody to buy U.S. products, aren’t tariffs ultimately like shooting yourself in the foot by making U.S. products fundamentally more expensive?
[00:12:47] In the global trade universe, again, we’re a little far afield, I’m going to bring it back, but go with me there.
[00:12:53] Clark Packard: Yeah, I think that’s exactly right. if you look at, it’s something between 50 and 60 percent of all imports into the United States are either capital goods or raw materials, intermediate inputs that American firms use to make products here and then export them abroad and also serve the U.S. domestic market. a tariff might have worked in a less globalized world, but given how interconnected everything is these days, and how supply chains in particular are globalized all around the world and they’re very efficient, you make yourself less globally competitive by imposing tariffs on capital goods and intermediate inputs, the stuff that you use, American citizens. Producers use to make the stuff that they’re making and sell, both again, both domestically and abroad.
[00:13:46] Joe Selvaggi: Yeah. again, I, so that we don’t appear to be somehow partisan, we’re going to be talking about the Biden administration’s recent tariffs, but of course this, the rhetoric of, let’s say the Trump administration, the whole, I characterize it, the big category of China is eating our lunch by imposing tariffs on products coming from China, which are many, in many cases, inputs and ultimately the effect is to make U.S. Products more expensive and less competitive. Ultimately, by imposing tariffs on China to combat them eating our lunch, is effectively eating our own lunch. Which is to say, we’ve shot ourselves in the foot by making products, in general with tariffs for U.S. more expensive abroad. And then we’ll move on, but I just want to put a fine underline in there.
[00:14:29] Clark Packard: Yeah, I think that’s exactly right. that, but to be clear, I do think the Trump administration correctly diagnosed a lot of the problems. Like, I’m not here to defend certain Chinese industrial policy practices and heavy intervention, I just have very serious concerns about the sort of remedies that, that, President Trump, as well as now President Biden, have imposed to deal with the unfair trade practices coming from China and again, I’m happy to get into all of that as we discuss the EB tariffs and all that.
[00:15:02] Joe Selvaggi: And for the benefit of the listeners, I am not taking the position that China is a free trader and, a good actor here. I might argue that free trade works even when the other guy’s a bad actor, but that’s perhaps worthy of an entirely, different, podcast.
[00:15:16] So let’s do this. Let’s shift our conversation from tariffs in general to these particular tariffs that were just announced earlier this month by the Biden administration. First questions first, how is it that the man in the Oval Office is imposing tariffs? I thought this would be something that, our, yeah, for Article 1, people would be doing. Congress would be deciding, this is a very complex issue. Wouldn’t we want Congress to decide which tariffs to impose on which countries?
[00:15:39] Clark Packard: Yeah, that’s a good question. for most of American history, It would have been handled through Congress from basically the founding of the country to the mid-1930s.
[00:15:50] Congress set individual tariff rates. But beginning in the 1930s, Congress began delegating that authority to the executive branch on the assumption that the executive branch would be less powerful. So, I hope that was, I hope it was parochial and more open to global trade, and better able to balance competing interests, as opposed to the traditional log rolling, that you saw in Congress that led to the famous, I guess infamous, Smoot Hawley tariffs in the early 1930s.
[00:16:20] Those tariffs, for history, economic history buffs like me, were pretty clearly detrimental and helped prolong the Great Depression and deepen the Great Depression. And so, so, yeah, I think that it’s an excellent question because you’re exactly right. Article 1, Section 8 of the United States Constitution gives to Congress the authority to regulate commerce with international or with foreign nations.
[00:16:45] But again, though, I think, maybe a series of good faith, arguably mistakes, Congress has delegated that authority to the, to Congress. Executive branch, and that’s where we are now.
[00:16:59] Joe Selvaggi: So, the basis again, as I’ve read it, is they use section 301, which is a particular section of the, of, power, for, to impose tariffs based on unfair actions, from competing nations. So, we’re by virtue of the fact we’re using the section, we’re saying we’re doing it for the sole purpose or to combat unfair actions. I think this was a sort of a dusty old way of doing things, asserting that there are unfair actions. I think we have since come up with better ways of combating unfair practices.
[00:17:30] But this is something both now, of course, Biden has done it, but he’s really using it as something that Trump had done, maybe five, six years ago, using the same justification. Share with our listeners, what is this 301 and why did we dust it off, take it off the shelf and dust it off for this new raft of tariffs?
[00:17:45] Clark Packard: Yeah, it’s an excellent question. So, you’re right. The Biden administration is using Section 301 of the Trade Act of 1974, which allows the U.S. government to investigate and attempt to remedy quote unquote unfair actions and policies taken by foreign governments that violate U. S. trade agreements or unreasonably violations Burden U.S. Commerce.
[00:18:08] The statute is designed to create leverage to pry open foreign markets, by forcing the targeted governments to remove the offending measures. So, if you go back, the Biden administration is using the same investigation that the Trump administration used. which revolved around Chinese abuse of intellectual property and again, I thought that was a fairly compelling argument that the Trump administration made. I think it’s pretty clear that China does engage in the abuse of intellectual property to the detriment of American producers and ultimately American workers. and so as the review of those tariffs, statutorily mandated review, the Biden administration took those.
[00:18:51] That investigation and said, okay, now we’re going to extend these tariffs. And dramatically raised the rate to, let’s say, on electric vehicles, for example, they quadrupled the rate of the tariff from 25%, which was already very high, to 100%.and, I, ultimately the Biden administration is justifying this on national security grounds, but that’s a very different argument than, China engages in the abuse of intellectual property.
[00:19:23] I think both, you could make a case for both, but that’s, it’s incongruent the way, on one hand, they’re using a statute designed to combat intellectual property abuse.to now say, well, the importation of electric vehicles from China poses a national security risk to the United States. And I’m a lawyer, and so I have very serious statutory concerns, and I’ve said this publicly that if you want to go down this road, there was a right way to do this.
[00:19:54] There is a statute that gives the executive branch the authority to restrict imports in the name of national security. That’s the route you should have gone down, not trying to pigeonhole this into an argument about intellectual property and IP abuse.
[00:20:09] Joe Selvaggi: So, there’s no new allegations that China has suddenly, again we’re going to talk about the products that we’re imposing, you mentioned EVs, there’s no sort of allegation that suddenly China has taken U.S. EV, electronic, electric vehicle technology and stolen it and used that stolen technology to make cheaper vehicles. There’s no such allegation that Biden has not justified any of these with that particular 301 clause. style, accusation. There’s nothing new has come to light.
[00:20:39] Clark Packard: Yeah, that’s basically right. Again, the New York Times quoted senior administration officials saying, we firmly believe this is a national security risk. We’re concerned about data, from being transferred from, an American consumer driving around a Chinese EV. you and transmitting that data back to the Chinese Communist Party in Beijing.
[00:20:59] And again, if the U.S. wants to make that argument, I would look at that in good faith and, judge it on the merits. But at this point, that’s not what they’re arguing. I think what they’re doing is they’re doing this for political expediency. That is to say, we have this, uh, statutory, statutorily mandated review of the Trump tariffs.
[00:21:18] Thank you very much. We’re required to do it. We can adjust tariffs, under that authority, so we think it gives us carte blanche, to do this, and I’m skeptical because I think that erodes the rule of law, ultimately, which is one of the things that, that makes the United States such a, compelling country.
[00:21:35] The other place to invest for foreigners is that there’s very strong protection for the rule of law. We have a way of ensuring that the processes are taken care of according to the books, and it’s not just rank politics like you see in China, where might makes right and whatever the Chinese Communist Party wants. Ultimately is what happens. and so, yeah, I have a concern that it does erode the rule of law.
[00:22:01] Joe Selvaggi: Yeah, indeed. It reminds me that using the HEROES Act to forgive student debt, it, it just, it doesn’t pass the laugh test. So, let’s get into this, the tariffs on the cars. I will forgive our listeners if they will say that despite the fact that China makes more, Electric vehicles in any other country on earth.
[00:22:17] We don’t see too many of them because I don’t think we have any. I think my last is less than 1%.so we’re importing about 1 percent of the, Chinese electric vehicles. And yet we’ve decided to target them going from 25%, which You know, I don’t know the numbers, but makes it prohibitively expensive, 25%, going to 100%, which makes it, no, no producer could have 100 percent tax on their product and sell. So, what’s the logic of targeting a product that we don’t even use yet anyway? Is there any?
[00:22:46] Clark Packard: Yeah, their argument is, if we don’t get ahead of the curve, we face a massive shock of imports flooding the U. S. market, because that’s what Europe is seeing right now. Europe has experienced a deluge of Chinese EVs into various EU countries.
[00:23:06] And it’s a shock to the system, and producers in the EU are struggling to adjust. So, so the Biden administration is saying, we need to get ahead of this thing, and so we’re going to just basically wall off the United States from Chinese EVs. I think, like you mentioned, that very few EVs from China end up in the United States.
[00:23:26] It’s, like you said, it’s 1 percent of the U.S. EV market. But ultimately, I think this is mostly driven by politics. if you think about it, right, Donald Trump is promising a 60 percent across the board tariff on all products. Coming from China and a 10 percent tariff on all products coming from countries that are not China, so every other country in the world and so the Biden administration is trying to appeal, to a pretty narrow slice of voters in the Midwest, particularly, unionized auto workers. And say, saying, okay, we’re going to, do something pretty serious and severe to restrict foreign competition, and specifically target the Chinese, and so we’re going to announce 100 percent tariff.
[00:24:16] Shortly after they were announced, Donald Trump came out and said, well, I would impose a 200 percent tariff on imports of electric vehicles from China. At that point, it’s just silly. It doesn’t really matter if it’s 100 percent or 150 percent or 200%. None of those cars are entering the United States either way.
[00:24:33] Joe Selvaggi: I’m curious, though, again, this is a little sidetrack, if we take the sort of the rhetoric of the Biden administration wanting us all to be in electric vehicles, and given that the market is such that, sure, there are electric vehicles here, so like Tesla’s and actually Mercedes Benz and the, expensive, very expensive electric cars, very few inexpensive electric cars, so even if a person of modest means wants an electric car, they can’t afford it.
[00:24:56] So, essentially, this is making it very difficult for the U.S. to embrace the universal acceptance of electronic vehicles. We’re essentially, the policy seems in tension with itself. You can’t have everyone buy electric cars and then say, point them to the Tesla dealer. It’s just not possible.
[00:25:13] We’re, this tariff effectively, by banning, inexpensive, Electric vehicles from China, you’re essentially saying to the 90 percent of the car market, sorry, stick with your internal combustion engine car, right?
[00:25:24] Clark Packard: Yeah, that’s exactly right. I think that this is another example where when they’re, the Biden administration’s goals to If you take those three at a time, the folks who.
[00:25:33] Stand up a boost domestic manufacturing conflict with its stated goals on. Climate change, and like you said, embracing a transition. to a cleaner, functioning automobile. they’re always siding with. Domestic producers at the expense of their stated climate goals, because like you said, the tariffs will stump the deployment of EVs, and like maintaining solar tariffs, anytime, again, anytime a climate goal conflicts with a domestic manufacturing goal, the administration seems to side with manufacturing, and that’s not just the U.S. government. The Biden administration, the Trump administration did the same thing, although they didn’t have the same sort of stated climate goals, that the Biden administration has, but ultimately the last two administrations have bent over backwards to quote unquote protect a very narrow slice of the climate agenda.
[00:26:31] Manufacturing, domestic manufacturing industry. but yeah, I think it ultimately hurts the environment, again, much like a solar tariff. I’m of the opinion that it doesn’t really matter where a solar panel is made. If you firmly believe that climate change is, poses a systemic risk to the future of the world, then we should embrace very cheap, very rapidly deployable, technologies like Cheap solar panels from Indonesia and Vietnam and China.
[00:27:04] Joe Selvaggi: Right, it seems, either disingenuous or, if you believe what you say, as you say, if climate is the threat that most many say it is, We should not care where it comes from. I want to also talk about steel. It seems interesting to me, the justification for renewed steel tariffs is we want to use American clean steel.
[00:27:24] This is a new phenomenon. I wasn’t aware that we’re that much cleaner when we produce our steel. But again, the same logic obtains if we put a tax on Chinese steel that’s dirty, and only use American steel that’s clean, but that steel is more expensive and is an input to all U. S. products, cars, you name it. That makes those products more expensive, less sellable to the world. Again, it’s a big world. that means Chinese products become more competitive because plenty of places are happy to buy dirty steel from China and dirty steel products from China. Don’t we essentially make the world much dirtier by trying to, tax our way away from dirty Chinese steel?
[00:28:05] Clark Packard: Yeah, that’s right. And I’ve always said, I think it is pretty clear that the United States produces cleaner steel than China, but there are parts of Germany, for example, that produce cleaner steel than the United States. So should we be subsidizing the United States? The importation of steel from Germany, right?
[00:28:22] Like you can play these rhetorical games. but yeah, ultimately, I think you’re right. You tend to shoot yourself in the foot when you try to, play chess master, and dictate where global markets are going. I think demand would ultimately, be such that, there would be, Again, demand for cleaner steel, but the U.S. government sort of putting its thumb on the scale, I don’t think it has the best history of kind of picking and choosing, that. and again, I do think it ultimately undermines stated climate goals.
[00:28:52] Joe Selvaggi: And again, just double back to the solar panels. I think batteries, battery components, all kinds of things that go into electric products that are alternative to, let’s say, combustion engines, by making those more expensive, we make sure that we virtually guarantee that the uptake will be slower. People will have fewer solar panels, fewer electric cars with batteries, fewer electrified things if it’s more expensive. So effectively, we’re making the world dirtier with these tariffs, perhaps for good intentions, but perhaps misguided intentions. How about this weird thing about ship to shore cranes? I don’t understand this, so this doesn’t fall into any bucket. I’m curious what your view, as someone who studies this topic deeply, what is the logic of tariffs on ship to shore cranes?
[00:29:38] Clark Packard: I frankly, I don’t understand it. I think it’s that, that, the U.S. ports are pretty in dire shape, I would say. and there, there’s a concern that, oh, these products are being unfairly traded in the United States. But again, if you are serious about making sure we have the most competitive ports, and they’re dredged appropriately, and for deep enough purposes so that cargo ships can come in and out, it makes little sense to target it.
[00:30:07] Again, an input that, that we use to facilitate commerce. It’s, what kind of ship to shore crane production manufacturing is taking place in the United States? Is it that large of a constituency that, that we really need to protect that? I don’t know. but I, my, my assumption would be no.
[00:30:28] Joe Selvaggi: So, if there’s any argument for, whatever we want to call this. And the last thing we’re talking about, I’ll call it protectionism or tariffs or hostility towards foreign products. If there’s any justification that persuades me, it’s national security. And I think that was carted in, we mentioned in EV somehow, a Chinese electric vehicle is going to be like a moving TikTok account that’s going to transmit where you are going to the grocery store and that’s going to be some sort of strategic advantage China might have.
[00:30:54] As absurd as that is, I can’t imagine legitimate concerns about things like semiconductors or medical products that, God forbid, another pandemic or, armed conflict with China. We don’t want all our semiconductors to be coming from a place that. We’re in global competition. I don’t know if it winds up being confrontation, isn’t it just a national security issue to ensure we have the medicine and the chips that we need, God forbid, if there’s a conflict in the future?
[00:31:21] Clark Packard: Yeah, I think that’s right, right? I’m an adamant free trader. I’m a Cato, crazy Catoite, as they say, but even I would acknowledge Milton Friedman, one of my heroes, Adam Smith, all recognize that there is a national security exception, but I tend to think that national, the national security exception Has a history of swallowing, the rule, and basically becoming a protectionist cudgel, right?
[00:31:45] So, so the Trump administration in 2018, 2017, 2018, imposed national security tariffs on imported steel, including from countries like NATO allies, Israel, Canada, under no sort of rational argument is Canadian rebar a national security threat to the United States. So, again, I’m very skeptical about how this plays out.
[00:32:12] takes place in reality. but again, I, my hope is that ultimately Congress would more tightly define what it, what national security means such that we could ferret out, bogus claims about Canadian steel being a national security risk and focus on, again, I think there are compelling arguments, on semiconductors in particular.
[00:32:35] I’ve written, multiple times that I think some trade with China needs to decline. but I think that the overwhelming majority is doesn’t impose or impose any national security risk or doesn’t. Result in sort of one sided dependencies, but the semiconductor example is exactly right.
[00:32:53] I think that there are ways we need to be more circumspect about Chinese chips in the United States, and we need to be more circumspect about exporting chips to China. but ultimately, the administration’s export controls, I think, were way too broad. I think you can make a compelling case to, to restrict the sales of tip top upper echelon chips coming from the United States to China.
[00:33:16] That maybe makes perfect sense that, hey, this could be used in a weapon that could ultimately be turned around on us. but ultimately, I think a lot of this is just rank protectionism, and my hope is over the Again, we can get a tighter definition. of national security so that we can ferret out legitimate claims and separate out legitimate claims from more bogus claims.
[00:33:38] Joe Selvaggi: Well, you had, I appreciate you making the self-deprecating, Maketo nut. One of the reasons I love to have Maketo guests on the podcast is because you don’t have, one doesn’t have a party allegiance, one, one can still be wrong, but not for, party loyalty, as a reason. But now we’re facing in November an election, and we’ve made very clear in our conversation that both candidates seem to be very tied to out tariffing each other, if I’ve invented a new word.
[00:34:06] Nobody seems to advocate for what I believe the benefits of free trade, which are benefits for everyone. All of us are consumers. We all would like less expensive products. We all should invite competition from the world, because Well, it’s still easier and better to make things here, we, our manufacturing, we still produce 26 percent of everything made in the world, even though we’re 4 percent of the world’s population, we’re doing just fine, but let’s play this out. If both candidates are pro protection, pro tariff, where will the free trade advocates come from? Are there any out there in the wilderness? or is the battle lost to this, these rhetorical flourishes of, People before profits or whatever the slogan is today.
[00:34:48] Clark Packard: Yeah, it’s an excellent question. Trade is the one issue that is almost unanimous among economists. If you look at the University of Chicago, they do these polls of economists. Do you think this tariff makes sense? Yes, or no? And why? And explain your rationale and what’s your intensity level on a one to 10 basis. and basically, it’s like 95 percent of all professional economists believe that And I think this is something that economists argue in favor of free trade.
[00:35:16] Again, you can find economists that support higher taxes and lower taxes and more regulation, less regulation. But when it comes to trade truly is the one issue that sort of unites economists. But that’s an interesting point. It’s a sort of predicament where it’s like, okay, the professionals who study this all the time are isolated, and detached from the policymaking world.
[00:35:39] I ultimately think that there are enough folks who get it in Congress and the administration. I think, the Biden administration is pretty well split between, more protectionist folks. And then, people like. Janet Yellen, the Treasury Secretary. She knows deep down that a lot of these tariffs are ill conceived, but ultimately has to give way to political, factors, overriding the economics.
[00:36:03] So, I’m pessimistic in the short run, but my hope is that we can get back and maybe the protectionist fever will break, and we can get back to this, for about 75 years, there was a bipartisan consensus in favor of open trade, in the United States. And again, that was Republicans and Democrats for 75 years, up until 2016 with President, Trump.
[00:36:26] And then now, continuing into the Biden administration. So, my again, my hope is over the long term, we can get back to that. That preexisting bipartisan consensus in favor of relatively open trade. That’s not to say we’ll ever get into a position like Cato would prefer where the United States just unilaterally drops all of its tariffs, irrespective of what foreign countries do. Ultimately, that’s right on the economics, but not really practical. So, I think, the United States getting back in the business of negotiating more free trade agreements, I think, would be good. but my hope is maybe in the medium run, maybe in the next five years, maybe the, hopefully the fever will break.
[00:37:04] Joe Selvaggi: Yeah, one hopes. I like that. You’re planning for the long term. I thought the participants of the digital science know that in the long run, we’re all dead. All right. Well, I appreciate you coming on the show and sharing your wisdom with us. I appreciate your reading and writing your research. where can our listeners, read more of your work, at Cato and elsewhere where you’re doing your research and putting out some, I think, very persuasive pieces on the merits and virtue of free trade.
[00:37:32] Clark Packard: Thanks. Yeah, Cato.org. And then, I’m on Twitter. It’s, at Clark underscore Packard, P A C K A R D. and I tend to tweet most of the things I write. So, yeah, those are both good places to, to see it. See if I’m, what I’m arguing makes sense.
[00:37:48] Joe Selvaggi: Right, well, again, if someone’s hardcore protectionist, I’m not sure a half hour with a conversation is enough to persuade them, but perhaps some more in-depth reading will, will get them going. So, if we’ve piqued their interest, we’ve done something here. So, thank you very much for joining me today, Clark. You’ve been a great guest and I really appreciate you taking the time with us. Thank you. Well, thanks again, and thanks for the invite. This has been another episode of Hubwonk. If you enjoyed today’s show, there are several ways to support Hubwonk and Pioneer Institute.
[00:38:17] It would be easier for you and better for us if you subscribed to Hubwonk on your iTunes Podcatcher. It would make it easier for others to find us if you offer a 5 star rating or a favorable review. We’re of course grateful if you share Hubwonk with friends. If you have ideas or comments or suggestions for me about future episode topics, you’re welcome to email me at hubwonk@Pioneerinstitute.org. Please join me next week for a new episode of Hubwonk.
Joe Selvaggi talks with international tax and trade expert Clark Packard about the tension between the economic and political calculus behind the Biden administration’s recently announced tariffs on Chinese products, including EVs, batteries, and steel.
Guest:
Clark Packard is a research fellow in the Herbert A. Stiefel Center for Trade Policy Studies. Prior to joining the Cato Institute, Packard was a resident fellow at the R Street Institute, focusing on international trade policy. He previously worked at the National Taxpayers Union doing the same. Prior to those roles, he served as an attorney and policy adviser to two South Carolina governors. Earlier in his career, he spent three years in private legal practice. Packard is a contributor to Foreign Policy and has written for National Review, Lawfare, The Bulwark, Business Insider, The National Interest and other publications. He has appeared on a number of television and radio programs to discuss international trade policy. He is a graduate of the University of South Carolina School of Law.
Study Finds Prevalence of Entrepreneurship Tied to Regulatory Environment, Portion of Immigrants
/in Economic Opportunity, Featured, Immigrant Entrepreneurship, News, Press Releases, Press Releases: Economic Opportunity /by Editorial StaffCommunities with vibrant entrepreneurial ecosystems more likely to prosper
BOSTON – The prevalence of entrepreneurship is linked to both the regulatory environment and the portion of foreign-born immigrants in a jurisdiction, according to a new study published by Pioneer Institute.
“Jurisdictions with vibrant entrepreneurial ecosystems prosper, while those without them decay,” said Joshua Bedi, author of Open for Business? Entrepreneurship, Regulations, and Immigration in New England and Beyond. “The defining characteristics of jurisdictions with strong entrepreneurial climates are low regulatory burdens and high concentrations of immigrants.”
Bedi finds that the regulatory characteristics most conducive to entrepreneurship are:
Massachusetts and Connecticut have environments that are slightly less burdensome than average, which may account for both having levels of entrepreneurship that have been above the national average for more than 50 years. The impact is even greater in New Hampshire, which has the nation’s least burdensome regulatory environment.
The 20 Massachusetts communities with the lowest tax rates have 15 percent more start-ups per capita and four times more “growth events” per capita than the 19 communities with the highest tax rates.
Bedi measures entrepreneurship as new for-profit business registrants per capita. To capture the most innovative and impactful types of entrepreneurship, he uses a narrower metric: high-value acquisitions of large companies and initial public offerings (IPOs) per capita. While the overall amount of entrepreneurship increased between 2000 and 2015, high-pact entrepreneurship has declined both in Massachusetts and nationally.
There is also a strong correlation between the portion of foreign-born and entrepreneurial activity. Immigrants are more likely to be self-employed than native-born individuals irrespective of educational attainment.
A 1 percent increase in the share of the state population that is composed of immigrants correlates with a 24 percent increase in startups per capita. The increase jumps to 42 percent per capita for high-value acquisitions and IPOs.
Vermont is the New England outlier to the correlation between immigrants and entrepreneurship. Bedi suggests that may be because of the state’s combination of harsh regulation and a low proportion of immigrants.
Among Bedi’s recommendations are that municipalities should streamline the steps required to start a business. He notes that starting a restaurant in Boston requires 92 steps that involve 9 city agencies. Other cities have reduced this to 35 steps.
Bedi also recommends that cities establish an online portal that would allow potential entrepreneurs to log in and navigate necessary paperwork and approvals.
He urges states to incentivize mobility by refusing to enforce non-compete agreements between employers and employees, eliminate occupational licenses that don’t protect public safety, and to advocate for comprehensive federal immigration reform.
Joshua Bedi earned his Ph.D. and was a Mercatus Center Fellow at George Mason University. He is now working at Copenhagen Business School as a Postdoc in Entrepreneurship at the Department of Strategy and Innovation, where he works under the Mærsk McKinney Møller Chair in Entrepreneurship.
Sheldon Novick on Henry James, American Women, & Gilded-Age Fiction
/in Education, Featured, Learning Curve, News, Podcast /by Editorial StaffRead a transcript
The Learning Curve Sheldon Novick
[00:00:00] Albert Cheng: Well, hello everybody! This is Professor Albert Cheng coming to you from the University of Arkansas with another episode of the Learning Curve podcast. And with me co-hosting this week is DEFR’s Alisha Searcy. What’s up, Alisha? How’s it going?
[00:00:36] Alisha Searcy: Hello, Professor. Wonderful. How are things going with you?
[00:00:39] Albert Cheng: Oh, pretty good. Summer’s in full swing here. And yourself?
[00:00:43] Alisha Searcy: It is in full swing. Work is going well, and I took a little time, sort of, to go on a cruise the last seven days through Alaska and a little stop in Canada. So that was a beautiful sight to see, looking at Glacier Bay and a few black bears and all that. All kinds of other beautiful sites in that part of the country and world.
[00:01:06] Albert Cheng: That’s cool. That’s jogging a few memories here in my mind. I remember going on one for my grandparents’ 50th wedding anniversary many years ago, so great to hear you got a little taste of that as well.
[00:01:18] Alisha Searcy: Yeah, it was beautiful. I will say, though, that I’m happy to be back in hotlanta.
[00:01:23] Albert Cheng: Ah, okay. Well, hotlanta and back into the normal swing of things, I guess. Or, I don’t know, maybe we should think of cruising as normal, but normal, you know what I mean? Just not wearing a coat and hat in June.
[00:01:36] Alisha Searcy: That’s right, that’s right.
[00:01:37] Albert Cheng: And speaking of other things in our usual day to day lives, hey, why don’t we talk some news, Alisha? Yes. You know, I think a couple shows ago, we were talking about cell phone policies in schools.
[00:01:51] I don’t even know when we were talking about it, but I know everyone’s talking about it these days. And so, I wanted to flag today, an article from USA Today, which provides kind of a nice summary of some of what’s going on. Across different states and state legislatures, in terms of cell phone policy, I think some of our listeners know last year, Florida became the first state that required public schools to ban students from using phones in class.
[00:02:17] But lawmakers in a few other states are entertaining similar kinds of legislation. So, this article, for instance, lists Indiana and Ohio, where there are similar bills that are being signed that requires districts to limit cell phone use during class time. And, and lots of other states have introduced legislation like that.
[00:02:37] So, for those of you who are paying attention to cell phone policy, take a look at that article. I know it’s certainly a pressing issue as we figure out how to navigate technology and cell phone use and how do we balance the value that technology can use, but also how do we moderate and protect kids against, you know, some of the downsides, whether it’s cyber bullying or misuse of technology in other ways like that.
[00:03:03] Alisha Searcy: Yeah, it’s a really important article, really important conversation. And Albert, I have to tell you, I probably fall on the opposite side of this position. I completely understand, and I’m a former superintendent, so I get it. From a safety standpoint, when you talk about You talk about social media, you talk about how distracted kids can be when they’re on their phones in school.
[00:03:26] But at the same time, I wonder in this digital age that we are in, you know, how as adults we can’t go an hour without checking our phones. Somehow, we’re expecting kids to go all day in a seven, eight hour school setting without using that level of technology. And so it seems to me that We should be moving in the other direction where we’re trying to find ways to incorporate phones as a part of the educational experience.
[00:03:56] I know that I’m in the minority on this, but I just, it’s odd to me. And I also think as a parent, you know, I have a 17-year-old rising senior and I like being able to text her during the day. Now, sometimes she’s not going to be completely responsive because she’s in class, right? But if I need her, if there’s an emergency these days of, you know, you’ve got.
[00:04:19] School shootings and all these things. I also worry about the safety factor here if you don’t have access to your kids like that. So, I’m interested in these conversations to see how they go. And I think you made a great point when you talk about the balance of it all. And I’d like to see a more balanced approach on this issue.
[00:04:35] Albert Cheng: Yeah. And I think, you know, you’re on to something about the safety thing, right? I mean, we care about our kid’s physical safety and certainly cell phone use is You know, helps us to do that in particular ways. And then, you know, I guess the folks who are maybe in favor of these policies, particularly on the social media side, are more worried about online safety.
[00:04:55] And so, yeah, I guess safety is this unifying thing. How do we strike that balance? So, tough thing to balance and it is so hopefully we can figure something out.
[00:05:05] Alisha Searcy: Exactly. But I’m glad you brought that up. My article comes from Real Clear Education. It’s entitled, Sending Your Child to a Better School Shouldn’t Be a Crime.
[00:05:15] And it’s written by a friend of our show, Derrell Bradford and Erica Jedynak, it looks like. Sorry if I butchered your name. And so, this article talks about, of course, this age-old issue that we’ve all heard about over the years where people, you know, parents in particular to have access to public school choice in particular, but in many states they don’t based on their zip code.
[00:05:38] And even a step further, as this article is pointing out, that parents like Kelly William Bowler, if people remember in 2011 in Ohio, she literally was sent to jail. Because she used her father’s address to send her daughters to school. Now, the daughters happened to spend a lot of time there. It could certainly be argued that they lived with him, but in the eyes of the school district, in the eyes of the law, that was not permissible.
[00:06:06] And so here’s a mom trying to get her kids a high-quality public education, who is sent to jail. for using someone else’s address. And so, there’s this coalition that’s been formed with Durell and several other organizations entitled No More Lines Coalition. And it’s all about, just as it says, getting rid of these district lines.
[00:06:29] And I think what’s important in this article it is talks about where these lines come from. These are historic in nature, right, in terms of redlining, in terms of racism, frankly. I mean, we just have to call it what it is, and how communities were separated based on color, socioeconomic status, etc. And then we know that that has a direct impact on public education.
[00:06:53] And so I’m happy to see this coalition. DEFER is actually a part of it as well. I just think we have to have these tough conversations in states where your zip code is, in some cases, a sentence to not getting a high-quality public education, and we all know what happens. When you are educated, right, we know the economic impact, we know the social impact.
[00:07:15] And so kudos to the folks who wrote this article who are doing this work. This is personal for me because in the neighborhood that I grew up in South Florida, there were decent schools, but my mom in particular wanted us to go to high quality schools, my brother and I. And so my parents drove us to school and we got a great education and I would not be here if it were not for my high quality public education.
[00:07:41] And so I feel very strongly about it that we’ve got to get rid of these lines, allow parents to have access to public options that meet the needs of their children.
[00:07:50] Albert Cheng: Yeah. Yeah. It’s interesting. The article brought up, I mean, you mentioned a Kelly Williams Bowler, her case in Ohio in 2011. I remember that was my first eye-opening news article that kind of got me into, I mean, I was already into school choice then, but just, It’s only beginning and I think seeing that really opened my eyes really back in the day when right, you know, before I just, I was just starting grad school then.
[00:08:12] And so we’ve been at this for way too long. And so glad to see that coalition founded and hopefully we can get some more work done.
[00:08:20] Alisha Searcy: Absolutely.
[00:08:21] Albert Cheng: Thanks for sharing that, Alisha. And stay safe. Stick with us, we’re about to hit our break, but coming up, after that, we’re going to have Sheldon Novick, who’s going to talk to us about Henry James.
[00:08:43] Sheldon Novick is the author of the two-volume biography Henry James, The Young Master, and Henry James, The Mature Master. As well as Honorable Justice, the life of Oliver Wendell Holmes, and the editor of the Collected Works of Justice Holmes. Sheldon Novick, it’s a pleasure to have you on the Learning Curve podcast.
[00:09:04] Welcome to the show.
[00:09:06] Sheldon Novick: Thank you very much. Pleasure to be here.
[00:09:09] Albert Cheng: I think a lot of listeners might not know you. I don’t know exactly who Henry James is, so let’s start there. You’re the biographer of Henry James, the celebrated 19th century novelist. Begin by briefly sharing just the wider picture of who he was and why he’s such a timelessly important author.
[00:09:27] Sheldon Novick: He’s a very celebrated figure, partly because he was born into a family of celebrities and they were close friends with the very celebrated Oliver Wendell Holmes family, and so Henry James was the second child of five. He had a career as a writer. We remember him now as a novelist primarily, so that kind of distorts the life history.
[00:10:03] He was a freelance writer who made his Living as a writer, and so he was, although we don’t think of him this way, he was a businessman, he was writing for money, and did pretty well, and was unusual, and much celebrated by other serious writers, because he managed to make a living writing serious literature.
[00:10:35] Although it wasn’t all literary, he began really as a journalist, and we can talk about the phases of his life as we go along, and I’m not going to try to summarize that now.
[00:10:51] Albert Cheng: Well, speaking of phases, I mean, why don’t we get into the beginnings, his family, so, I mean, there’s just some things we know, I, I mean, uh, you know, looking at my notes here, I mean, they’re the James family, they were New Yorkers who made their fortune from business dealings around the early 1800s due to the construction of the Erie Canal.
[00:11:10] Henry James Sr. was an American theologian. I think many folks might know his brother well, William James, the Harvard philosopher and psychologist. Maybe they know his sister, Alice James, the noted diarist. Yes, tell us about his family and just his early life.
[00:11:26] Sheldon Novick: Well, it was a celebrated family, and of course that is Commonly, the relations who are remembered.
[00:11:34] He was, from his own perspective, and I did try to write his life story as he kind of narrated it as he went along, and he wrote an autobiography and a lot of autobiographical fiction. So, viewing his life as an old man, which is the story we have, looking back on it, he was, he was the second of five children who all lived to maturity and which was a considerable accomplishment of his mother’s, who was a very strong, strong minded and powerful and healthy woman who really provided his early education.
[00:12:21] The famous father was a deeply troubled man who was kind of a scandalous beatnik of his time. He wrote about free love and I think we would consider him an abusive parent, an abusive person now. But Henry, Henry grew up with the ambition of being a writer early on. And as I say, he began as a journalist. But he gradually added different genres as he went along.
[00:12:57] Albert Cheng: Let’s talk a bit about his writing and kind of get into that. As you mentioned, I mean, he’s a remarkably prolific and complex writer. His works span many genres, as you’ve alluded to. And so he wrote for 51 years, 20 novels, 112 short stories, and 12 plays, several volumes on travel and criticism, and lots of, Literary journalism.
[00:13:19] Could you talk about his ability to write widely and realistically? I mean, especially about, you know, wealthy American women and tension with the Gilded Age, American and European societies. I think that’s a big theme, right?
[00:13:31] Sheldon Novick: Absolutely. And you’re asking me to summarize a career, which is indeed extraordinarily varied. And for a writer, he has a real Life biography, which literary biographies are uniformly boring because writers are boring, you know.
[00:13:57] Sheldon Novick: They do their work sitting alone in a room. And Henry James was the compulsive writer. And you recite all of these alarming numbers. Not only did he write these enormous quantities for publication, but then he would sit up late at night writing letters.
[00:14:16] And the letters have all been collected and are available. And so you can read him narrating his life as he goes along. And I’m not going to try to summarize that, except to say overall that He was determined to be a realistic writer, which means that he wanted to have a life, and his notion of realism was sensory experience.
[00:14:48] He wanted to experience things, and his writing is a visual experience. Extraordinarily vivid and realistic because he’s drawing on his sensory memories, the smell of, the smell of London, you know, it’s just the sulfur smoke and the coal smoke and the wet, the constantly wet woolen clothing. So, you have a man writing realism in that sense and he writes.
[00:15:23] About women of the middle class, his family were, were well to do, they weren’t wealthy, it was old money, the father kind of wasted it away in crazy investments, and so Henry had to work for a living, and he supported his younger siblings.
[00:15:45] Albert Cheng: Let’s get into a little bit more detail. I mean, you mentioned just a lot of his inspiration and, you know, the source material was his own experience.
[00:15:52] And so let’s get into that with some of his specific novels. The Portrait of a Lady, published in 1881, is set in Europe. And it’s a story of an American woman, Isabelle Archer, who inherits a fortune. So, you see some, I guess, some links there to his own life. But this character, Isabelle Archer, is overwhelmed by two scheming suitors while searching for her own destiny.
[00:16:15] How did James’s own life and his travel inform his understanding of the differences between America and Europe to kind of enable him to write such a novel.
[00:16:26] Sheldon Novick: Okay, well then there’s a man who has grown up, his family was peripatetic, the father dragged them around from place to place. I think it’s important that he didn’t have a settled life in any one place for much of their life.
[00:16:49] As a family, the father dropped them in seaside resorts in France, while he went off about his own business. At other times, they were in various locations in New England and New York and Great Britain. So what’s extraordinary about him, I think, is that He is a genius of language, and he learned not just all these national languages, but he learned the, the dialects and the, the body language and the ways in which people dressed and expressed themselves and related to each other in all these different cultures.
[00:17:37] And The Portrait of a Lady is really what was meant to be the first of his novels. He had been writing, he was writing for newspapers, he was a journalist reporting from Paris to newspapers in New York, but he wanted to write A novel of a particular kind. Novels were, were written by and for women. At least these kinds of literary novels in, published in two or three hardbound volumes.
[00:18:14] That was a whole industry by itself. And so, The Portrait of a Lady, and just think about that title. This is his novel about middle class women for middle class women, and it’s about, it’s about marriage.
[00:18:34] Albert Cheng: So, let’s keep hammering on this theme with another, I mean, just the relation between, you know, his life and what was going on.
[00:18:41] Just to bring up another novel and talk about this, The Bostonians, published in 1886. Now this novel centers on an unusual love triangle and struggle between Basil Ransom, a conservative from Mississippi, and then Olive Chancellor, who is Ransom’s cousin and a Boston feminist. And then there’s a third character, Verena Tarrant, a pretty young protégé of Olive’s, who’s in the feminist movement.
[00:19:06] So you’ve got these colorful characters with colorful backgrounds. Yeah. Could, could you say a few things about this story in relation to the context of Henry James’s life and era?
[00:19:17] Sheldon Novick: Yeah, well, context is very important. This is Boston after the Civil War, and the truth is, Henry James didn’t know a lot about Boston, but he had been there for a time after the Civil War, and that was when he made his adolescent friendships, especially with Oliver Wendell Holmes, the future justice of the Supreme Court.
[00:19:46] And so this novel about the Bostonians is about these intense same sex friendships that adolescents formed then and now, and the triangle forms when a person of the opposite sex lures one of the friends off into. Well, there’s a lot of them off. It’s a triangle, as you say, but it’s a very particular one that, and that’s a theme that a plot that reappears constantly throughout his early, because you, we find it in his early short stories in that early phase when he’s writing briefly about adolescent friendships because he’s just.
[00:20:36] He’s just emerging from adolescence, that’s what he’s writing about. You will see that in all of his fiction, you will see that triangle.
[00:20:47] Alisha Searcy: This has been very fascinating, thanks for joining us. I want to ask you about Edith Wharton. She’s an American who wrote books. about upper class New York and became the first woman to win the Pulitzer Prize in Fiction.
[00:21:01] And Henry James, of course, and Wharton were close friends. Can you talk about their friendship between these two literary giants?
[00:21:07] Sheldon Novick: Yes, they were very good friends, and they were both very good at friendship and Henry James made a point. Of being emotionally present and he had learned in France to be masculine in appearance and dress and speech and he was very, he was kind of a little bit domineering.
[00:21:32] He was a big stout guy with a heavy beard. And he looked like a ship’s captain, kind of a bear of a man, but very, very friendly and emotionally open. And as I say, he just was very important to him to live on a daily basis. moment by moment basis to experience his relationships with people in a sensory way.
[00:22:03] So they were very good friends, Wharton was rich, James lived on his earnings, but Wharton was wealthy. And had a very unhappy marriage. Uh, she began to live on her own in Europe and Henry could introduce her into that world. And she in turn could drive him well. And she had a chauffeur and an automobile, which was a new thing.
[00:22:33] They would drive around the French countryside together. And that was really, they didn’t care about each other’s work very much, and didn’t care for it, at least in the later things. Wharton liked The Portrait of a Lady, which, well, was about her world. And James was not too fond of her novels.
[00:22:59] Alisha Searcy: Isn’t that interesting? Yeah. I thought you were going to say the opposite, that perhaps some of his writing about women was influenced by her.
[00:23:09] Sheldon Novick: Well, he, you know, they were both pretty well along by then and they didn’t influence each other, and they had very different languages and lifestyles, but the thing they had in common and this might interest you more than these other things, Henry James didn’t have a college education.
[00:23:31] At the time, it was a condition, you know, for men who Wanted to be treated as gentlemen and treated as authors to have the classical education that was modeled at Oxford and Harvard, which begins by learning to write Latin poetry and to translate it and immersion in the Latin and Greek classics.
[00:24:00] Neither Henry James nor Edith Wharton had that sort of education and they both missed it. And it was really required, and professors of literature and critics in England and America simply refused to take Henry James seriously because he lacked classical education. But he was extremely well educated, self-educated partly, but partly, he had grown up in this very cosmopolitan family of philosophers and lived all over Europe so that he could introduce Wharton to the, the learning and the culture of Europe.
[00:24:48] But they, they both were criticized and not taken seriously. as seriously as they ought to have been by the professors of then and now.
[00:25:02] Alisha Searcy: Very interesting. So, you mentioned a few minutes ago that Henry James lived off of his income. Let’s talk about the novel The Wings of the Dove from 1902 that tells the story of Millie Thiel, an American heiress, stricken with a fatal disease.
[00:25:18] And Kay Densher are London lovers who desperately want to marry but have little money and befriend Millie with the design of her leaving them enough money to be together. So, could you talk about Henry James’s life and his experiences that perhaps informed this fiction?
[00:25:37] Sheldon Novick: You need to keep your eye on that triangle.
[00:25:41] There are two women and a man in that one and the storm the plot is about a marriage. The Wings of the Dove is, again, filled with descriptions of people he knew, and there was a wealthy woman, his hostess in Venice was a wealthy woman, and this is kind of the story of her venture into Europe. And she is a Bostonian as well.
[00:26:13] Alisha Searcy: I’m definitely seeing the themes when you talk about this triangle. So, let’s talk about The Golden Bowl from 1904, which is a novel from the major phase of Henry James’s literary career. Set in England, it’s a complex study of marriage and adultery, and the relationships between a father and a daughter, and their respective spouses. Let’s talk about that novel, and the events in Henry James’s life that inform this masterpiece. Peace.
[00:26:39] Sheldon Novick: It is the last of his published novels, so it’s considered a kind of pinnacle, and it is really a magnificent work. This is an old man writing from a lifetime of experience, and he has by this time invented a way of expressing himself that embodies all of these Sensory memories and emotional history, so that it’s not exactly difficult reading, but it’s not the kind of reading that one is used to.
[00:27:16] But I want to focus on the title. The Golden Bowl, this is actually one of two late novels. The Golden Bowl and The Ivory Tower are complementary, and as you might think, The Golden Bowl is about The Friendship Between Two Women and The Ivory Tower is about a similar intense, intense, sensual friendship between men.
[00:27:47] And, you know, in our post Freudian age, we, you know, kind of snicker at these. But these references are intended. The golden bowl is the crystal bowl that’s gilded, covered with gold, but the importance of it is that there is a flaw in the crystal, and when it’s dropped, it shatters. And so, this is the image of the friendship between the two principal women characters, their friendship is broken when one of them is lured off into marriage.
[00:28:29] Alisha Searcy: Excellent. This has been great. I’ve got one final question for you before I ask you to read an excerpt from one of your books. So, we’ve talked about this sensory writing, which I think is beautiful. It’s very fascinating and I think it helps us all connect and really take you there as the reader. And so, I think it’s safe to say that Henry James has widely influenced modern fiction by showing and not telling his stories to the reader. And so would you tell us what you think teachers and students alike should remember most when you think about his life and literary career?
[00:29:04] Sheldon Novick: Let me say that the novel that Henry James thought was his best, and that he recommended to people, was The Ambassadors, which was the first of these late novels that are, we talk about his major phase, the Ambassadors embodies is.
[00:29:25] His new way of writing as someone who is personally present. One of the things that is important about the Ambassadors is that he succeeds in writing about People as individuals without labeling them, so that he using these devices of his own sensory memories, and they are real memories of real people, he can characterize these characters as unique individuals.
[00:30:03] Who have an inner life, who have a public character, and he describes the way they live in the world as unique individuals, and the friendships, and the love affairs, and the marriages, that each one is unique. Anyway, so that’s, that’s something I, I would say about how to remember Henry James. It is certainly true of the Golden Bowl as well. I would say those things about it.
[00:30:33] Alisha Searcy: I like that. I think that’s very important to remember for students and for teachers. So, thank you for that. As we close, Mr. Novick, we would love for you to read perhaps your favorite paragraph length passage from the Henry James biography to close out this interview.
[00:30:49] Sheldon Novick: Okay. Uh, yes. So let me read a brief passage. Well, a paragraph of mine, and then it’s followed by a little bit of Henry James. This is a passage from the Ambassadors. Which I take it is Henry James is recommending to us for this purpose. We won’t recognize the names of the characters, but it doesn’t matter.
[00:31:13] Madame de Vionette’s love for Chad is palpable. It is James owned. Reading. We feel it and share it. Temporal and spatial elements. Theory and experiment. Melody and harmony. Story and picture. Fuse beautifully as in the imagery of a poem. Sentences dissolve in the intensity of James remembrance. Punctuation and ordinary syntax drop away.
[00:31:44] The sentence, indeed, is no longer the unit with which James works. He makes impressionistic images rather than statements. Patiently creates a poem. Moments that seem to belong to the reader’s own memories. Shadows are not black but are infused with color. Double negatives take the place of their assertions.
[00:32:07] Each quality that is denied adds a dimension to one that is affirmed. Strether, quote, was not wholly disconcerted. His relation to his errand might prove none of the simplest. There was a detachment in his zeal and curiosity in his indifference. Close quote. Lambert Strether’s half puzzled, half surprised joy in the moment is not so much seen as felt.
[00:32:39] And here’s Henry James, a brief paragraph, how could he wish it to be lucid for others, for anyone, that he, for the hour, saw reasons enough in the near way the bright, clean ordered, water shy life came in at the open window. The near way Madame de Vionette opposite him over their intensely white table linen, their omelette au tomate, their bottle of straw colored Chablis, thanked him for everything, almost with the smile of a child, while her gray eyes moved in and out of their talk back to the quarter of the spring air in which early summer had already begun to throb, and then back again to his face and their human questions.
[00:33:37] Alisha Searcy: Absolutely wonderful.
[00:33:39] Sheldon Novick: I will stop there. Thank you.
[00:33:41] Alisha Searcy: That was awesome. Thank you. I loved your energy, the way it just picked up as you were reading. Absolutely wonderful. Thank you so much.
[00:33:50] Sheldon Novick: You are very welcome. It’s a pleasure.
[00:34:04] Albert Cheng: Well, that was a great interview. I actually didn’t know much about Henry James. I knew much more about his brother, William James. For those of you who are into education philosophy, you know he’s a major contributor to, or really actually a pioneer in educational psychology. So, it was great to hear more about Henry James this time around.
[00:34:21] That’s going to bring us to the end of our show. But first, the tweet of the week comes this week from Marguerite Rosa, and she has tweeted about an article from the Los Angeles Times about a fine that the state of California has imposed on Los Angeles Unified School District. So, I know, Alisha, you were talking about how folks got thrown into prison for crossing district lines.
[00:34:45] And trying to enroll their children in a better school, public school. Well, I don’t know if you’ve paid attention to this one, but LA Unified has gotten fined about 8 million for having class sizes in their transitional kindergarten classrooms that are too high. And so, this, I think, really underscores another challenge.
[00:35:03] I mean, you know, we want to provide reasonable class sizes, really, especially at that really young age. Age, you know, transitional kindergarten, four-year-olds, five-year-olds. And, and you want to make this opportunity a little bit more widely available for parents that want it. And, yeah, it’s kind of tough too.
[00:35:20] Meet that demand and while at the same time, you know, trying to meet all parents needs while at the same time trying to abide by certain state policies that cap class sizes. And now LA Unified is getting fined for this. So I’m sure there’s way more to the story, but check out that news article.
[00:35:36] Alisha Searcy: Yeah, I’m a big fan of Marguerite Rosa, and I think anybody who listens to us, and you have an opportunity to participate in one of her courses that she does through Georgetown, you should absolutely do it.
[00:35:47] She’s one of the most brilliant and both common sense people that I’ve ever heard from listen to study. And so anyway, her point in this is the 8 million that the district has to spend could also be used to benefit students. So to your point, Albert, it’s one of those things that the policy has to be in place because districts need to do right by kids. At the same time, do the policies make sense for the kids?
[00:36:12] Albert Cheng: Yeah. Yeah. So anyway, I don’t, I don’t know how to cut that Gordian knot, unfortunately.
[00:36:17] Alisha Searcy: Yeah.
[00:36:17] Albert Cheng: Hopefully we’ll figure it out and Alisha, thanks a lot for being a co-host again this week. Great to have you here.
[00:36:23] Alisha Searcy: Always great to be with y’all. We’re a good show.
[00:36:25] Albert Cheng: All right. And make sure you join us next week. We’re going to have Eva Moskowitz, the CEO of Success Academy Charter Schools and author of A Plus Parenting, The Surprisingly Fun Guide to Raising Surprisingly Smart Kids. So, you’ll want to join us next week for that conversation, but until then, be well, everyone, and we’ll see you soon.
[00:36:47] Alisha Searcy: Take care.
This week on The Learning Curve co-hosts U-Arkansas Prof. Albert Cheng and DFER’s Alisha Searcy interview Henry James biographer Sheldon Novick. Mr. Novick discusses the complexities of Henry James’ life and writing career, highlighting his significant literary contributions, the influence of his family’s intellectual legacy, and the realistic portrayal of social tensions in his works. Novick explores Henry James’ life experiences that shaped his novels like The Portrait of a Lady and The Golden Bowl. He shared more on James’ important friendships, particularly with the novelist Edith Wharton, emphasizing James’ enduring influence on modern fiction. In closing, Novick reads a passage from his biography Henry James.
Stories of the Week: Albert shared an article from USA Today discussing state cell phone bans in schools; Alisha reviewed an article from Real Clear Education about how parents picking their children’s schools shouldn’t be a crime.
Guest:
Tweet of the Week:
https://x.com/MargueriteRoza/status/1799829058496467313
Protectionism’s Bipartisan Embrace: Who Pays When Imports Cost More
/in Featured, News, Podcast Hubwonk /by Editorial StaffClick here to read a transcript
[00:00:00] Joe Selvaggi: This is Hubwonk. I’m Joe Selvaggi. Welcome to Hubwonk, a podcast of Pioneer Institute, a think tank in Boston. Earlier this month, the Biden administration announced new tariffs on 18 billion worth of Chinese imports, justifying the action as necessary to protect American industries from overcapacity created by Chinese subsidies.
[00:00:23] The legal and rhetorical justification for targeting China largely mirrors that of the earlier Trump administration. and increases tariffs on electric vehicles, solar cells, batteries, steel, and aluminum as defense against a predatory trade rival. While some critics see this action as the president’s effort to win votes in the swing states of the industrial heartland, others caution that raising tariffs on low cost EVs, solar cells, and batteries would raise their price.
[00:00:53] Thus hindering efforts to shift towards renewable energy and contributing to the persistent inflation complicating the president’s re-election prospects. How does the U. S. design and implement tariffs? What is the scope of this latest round of duties? Who stands to benefit from these protections? And who pays the price when Chinese products become more expensive?
[00:01:18] My guest today is Clark Packard, a research fellow at the Herbert A. Stiefel Center for Trade Policy Studies at the Cato Institute. As an attorney and economist focusing on federal trade policy, his research examines the effects of tariffs on American industry and the economy. He will share with us the background on the incentives and justifications for implementing tariffs in the past, and discuss how the Biden administration’s recently announced tariffs will likely affect U.S. consumers, related industries, and the nation’s ability to move towards affordable, renewable energy. When I return, I’ll be joined by Clark Packard from the Cato Institute. Okay, we’re back. This is Hubwonk. I’m Joe Selvaggi, and I’m now pleased to be joined by research fellow at the Herbert A. Stiefel Center for Trade Policy Studies at Cato Institute, Clark Packard.
[00:02:08] Welcome to Hubwonk, Clark. Thanks for having me. I’m glad to be here. All right. Well, I’m thrilled to have you here to have a discussion about the recent raft of tariffs announced by the Biden administration. I’ve read, what the tariffs seem to entail, and some of the press releases. Also, some of the reactions to the, to the tariffs.
[00:02:27] So for the benefit of our listeners, I want to explore what the tariffs are, who they’re intended to help, whether you think they’re a fairly good idea and they’re going to achieve their intended purpose. But before we get into the nitty gritty of these particular tariffs, let’s take a step back and talk about tariffs in general for the benefit of listeners who maybe understand slightly a bit about what tariffs are.
[00:02:52] Let’s start at the beginning. What is a tariff? Who gets to impose tariffs? And, we’re going to talk about who ultimately pays those tariffs, but let’s start at the beginning. who decides what countries and what products we, we impose tariffs on?
[00:03:03] Clark Packard: Yeah, that’s a good question. I think to answer that question, It’s the U. S. government decides which countries to impose tariffs on, and there are a number of processes by which they do that. But generally speaking, a tariff is essentially just a tax on imports of any particular product or services even. and so essentially what it does is it’s meant to raise the cost of a foreign product entering the United States to make, to thereby make a domestic product, a similar product, more competitive.
[00:03:36] and, that’s how it works in theory, but there are a lot of questions and I think legitimate concerns about how they work in practice.
[00:03:45] Joe Selvaggi: All right, so we’re talking about products, you can just say products, we’re talking general things, everything from cars and semiconductors, which are, high value products, all the way to commodities such as steel, you could impose a tariff, and as you say, the value of this is to make the foreign product more expensive, therefore make the relative U.S. similar product more expensive, more competitive in theory to benefit U.S. jobs. But in general, let’s say, how do tariffs get sold to either the American public or the American worker or the American voter, if we’re really being precise? What’s the justification for tariffs in the public square?
[00:04:23] Clark Packard: Most of the time, they’re sold as a tool to counteract unfair product, unfairly traded products coming into the country. That is to say, if a foreign government subsidizes the production of a product, The U.S. can use a tariff to counteract that subsidy, that’s not always the case, though.
[00:04:43] There are times where tariffs are imposed for just rank protectionist purposes, that there isn’t an argument about, well, it was unfairly subsidized and then dumped into the U.S. market, which is to say sold below cost, but instead it’s just about protecting the domestic industry and bolstering the domestic industry.
[00:05:06] From foreign competition, and that a lot in the steel industry in particular. There’s a long history of U. S. steel companies begging at the trough for protection from foreign competition. and so you when you go and look at what The price of steel sells on a world market for, it’s about twice as much for a ton of hot rolled band, in the US, as opposed to the rest of the world, because the United States has effectively walled itself off from foreign competition in the steel industry.
[00:05:38] Joe Selvaggi: So, again, we’re not going to point any fingers just yet, but the idea is we may want to punish foreign producers who we see are unfairly, subsidizing or creating an advantage, that a free market doesn’t enjoy. So, we want to, in a sense, punish unfair actors in otherwise free markets. Again, we’re not going to talk about these particular tariffs yet, but historically, who have we targeted? which countries? you mentioned steel as a product that we protect, here, but steel comes from everywhere, Canada even. What countries have been the target of tariffs in the past?
[00:06:10] Clark Packard: It’s, it tends to be China, a lot of the anti-dumping and countervailing duties, that is to say the tariffs that we use to counteract unfairly traded products, come from China. I would also say that the United States has a tendency to target low wage countries, developing countries but again, mostly these. The tariffs and trade remedies tend to target China. That’s not, again, not exclusively. There are plenty of trade remedies and tariffs on products that originate in the EU, for example. But again, it tends to be developing countries, in particular China.
[00:06:50] Joe Selvaggi: And you mentioned steel as one of the products that we tend to want to protect. But what about, what are some of the other industries besides steel that we’ve tried to, let’s say, use tariffs to either protect or punish unfair actors?
[00:07:02] Clark Packard: Yeah, there’s a long history of automobile tariffs, there’s a long history of, restricting the imports of sugar, through not necessarily a tariff, but a quota, the amount that we can import is capped, on foreign sugar entering the United States, which again has led to, essentially, sugar in the United States is twice as expensive as it is in most other parts of the world. Historically, it’s been those industries that were located in politically sensitive areas, the Midwest, for example, the steel and automotive industry is largely located in the Midwest. and so, I think you can draw, some conclusions from that, which is to say that we, again, a lot of this is driven by politics and those areas that are, Important to win for political purposes. and I think, again, that might be smart politics, but, raising the price of steel by twice, is maybe not the best thing if you’re trying to bolster domestic manufacturing in the United States. so, again, these things have a tendency to ripple throughout the economy, but again, I think a lot of its driven by politics.
[00:08:13] Joe Selvaggi: Indeed. And you mentioned steel and sugar. These are products, but of course they’re inputs for other products, which everything made from those products becomes more expensive. But I want to get even more fundamental and say, when we look at tariffs, as you mentioned, it makes foreign products more expensive.
[00:08:29] Effectively, the product here in the U.S., you mentioned steel twice as expensive, sugar twice as expensive. The notion, I think, for the average casual observer of tariffs, they imagine the Chinese or whomever produces cheap sugar paying these tariffs as if it’s a tax on the Chinese. Of course, what we’re doing is we’re taxing the product that an American buys. So, again, I don’t want to put more words in your mouth, but who pays a tariff if ultimately it makes a U. S. Consumer’s product more expensive, isn’t it the U.S. consumer that’s paying all tariffs?
[00:09:02] Clark Packard: Yeah, that’s exactly right. So, there are two, two questions, built into yours, which is, first of all, the legal, the question of who legally pays the tariff that is legally required to be paid by the importer, the importer of record, but the more fundamental economic question is what’s the incidence of the tariff?
[00:09:22] That is to say, who actually pays the tariff? Ultimately, and I think that it’s pretty clear that tariffs are borne by U. S. consumers. we had a grand experiment in this during the Trump administration. In the New York Federal Reserve and economists at Princeton, among other economists have studied the incidents of the Trump tariffs and found that it was almost 100 percent pass through.
[00:09:47] That is 100 percent of the cost of the tariff was borne by Either a consumer buying the product or sometimes the, the business that, that imported the input or whatever, basically swallowed the cost and accepted, smaller profit, profit margins or what have you, but ultimately the academic literature on this is pretty clear that the American public, in one way or another, paid the Trump tariffs. That’s not to say that it doesn’t hurt foreign producers, it does, but ultimately the cost is borne by Americans.
[00:10:25] Joe Selvaggi: And I also, again, to beat this to death here, if I buy a Chinese product that has a tariff on it, I ultimately pay the tariff because it’s been made more expensive by the tax, which has been passed to me.
[00:10:35] But if the alternative American product that it’s competing with is also more expensive, whether I buy the Chinese product or the U. S. product, I’m paying the tariff. For the tariff, meaning if the, I would imagine if I tax the heck out of my competition from China and force consumers to buy U.S. products, those U. S. products, because they’re not facing true competition, but rather contrived competition, those U.S. products are more expensive. Now, maybe you might say, oh, I’m okay spending more for a U.S. product, but ultimately, I pay the tariff whether I buy the Chinese or the American product. Am I going on a limb here?
[00:11:06] Clark Packard: No, I think that’s exactly right. And this gets into what we, in the economics world, talk about, which is stated preference versus revealed preference. People talk about, well, I’m willing to pay extra to buy an American product and support local producers. but then, the data’s pretty clear that people may say that, but they don’t actually do that in reality.
[00:11:29] I think people are cost conscious, especially in a time with relatively high inflation. and so, I think that it’s pretty clear that people are willing to pay maybe a little bit more to have something domestically made, but not exorbitantly more, for a product that’s domestically made. And so, Yeah, I think there are legitimate questions about how effective tariffs tend to be.
[00:11:54] Joe Selvaggi: Now, again, we’re talking about the fact that these tariffs make, of course, foreign products more expensive here. It makes the American product less; I say more expensive because it doesn’t face true competition.
[00:12:05] But ultimately, we live in a big world. I like to remind people on this podcast, 24 out of every 25 people on earth are not American. It’s a big wide world out there, 8 billion people, all buying products. If our products are both, produced with, steel that’s, inflated in price, therefore our American made products are more expensive, both to us, but to anybody we sell it to, it could be to the sugar too. American Twinkies are going to be more expensive out abroad because the sugar made. Used to make those Twinkies is more expensive. If ultimately, again, we’re getting off track here, but if we want to be competitive, meaning we want our trade deficit to be competitive, we want everybody to buy U.S. products, aren’t tariffs ultimately like shooting yourself in the foot by making U.S. products fundamentally more expensive?
[00:12:47] In the global trade universe, again, we’re a little far afield, I’m going to bring it back, but go with me there.
[00:12:53] Clark Packard: Yeah, I think that’s exactly right. if you look at, it’s something between 50 and 60 percent of all imports into the United States are either capital goods or raw materials, intermediate inputs that American firms use to make products here and then export them abroad and also serve the U.S. domestic market. a tariff might have worked in a less globalized world, but given how interconnected everything is these days, and how supply chains in particular are globalized all around the world and they’re very efficient, you make yourself less globally competitive by imposing tariffs on capital goods and intermediate inputs, the stuff that you use, American citizens. Producers use to make the stuff that they’re making and sell, both again, both domestically and abroad.
[00:13:46] Joe Selvaggi: Yeah. again, I, so that we don’t appear to be somehow partisan, we’re going to be talking about the Biden administration’s recent tariffs, but of course this, the rhetoric of, let’s say the Trump administration, the whole, I characterize it, the big category of China is eating our lunch by imposing tariffs on products coming from China, which are many, in many cases, inputs and ultimately the effect is to make U.S. Products more expensive and less competitive. Ultimately, by imposing tariffs on China to combat them eating our lunch, is effectively eating our own lunch. Which is to say, we’ve shot ourselves in the foot by making products, in general with tariffs for U.S. more expensive abroad. And then we’ll move on, but I just want to put a fine underline in there.
[00:14:29] Clark Packard: Yeah, I think that’s exactly right. that, but to be clear, I do think the Trump administration correctly diagnosed a lot of the problems. Like, I’m not here to defend certain Chinese industrial policy practices and heavy intervention, I just have very serious concerns about the sort of remedies that, that, President Trump, as well as now President Biden, have imposed to deal with the unfair trade practices coming from China and again, I’m happy to get into all of that as we discuss the EB tariffs and all that.
[00:15:02] Joe Selvaggi: And for the benefit of the listeners, I am not taking the position that China is a free trader and, a good actor here. I might argue that free trade works even when the other guy’s a bad actor, but that’s perhaps worthy of an entirely, different, podcast.
[00:15:16] So let’s do this. Let’s shift our conversation from tariffs in general to these particular tariffs that were just announced earlier this month by the Biden administration. First questions first, how is it that the man in the Oval Office is imposing tariffs? I thought this would be something that, our, yeah, for Article 1, people would be doing. Congress would be deciding, this is a very complex issue. Wouldn’t we want Congress to decide which tariffs to impose on which countries?
[00:15:39] Clark Packard: Yeah, that’s a good question. for most of American history, It would have been handled through Congress from basically the founding of the country to the mid-1930s.
[00:15:50] Congress set individual tariff rates. But beginning in the 1930s, Congress began delegating that authority to the executive branch on the assumption that the executive branch would be less powerful. So, I hope that was, I hope it was parochial and more open to global trade, and better able to balance competing interests, as opposed to the traditional log rolling, that you saw in Congress that led to the famous, I guess infamous, Smoot Hawley tariffs in the early 1930s.
[00:16:20] Those tariffs, for history, economic history buffs like me, were pretty clearly detrimental and helped prolong the Great Depression and deepen the Great Depression. And so, so, yeah, I think that it’s an excellent question because you’re exactly right. Article 1, Section 8 of the United States Constitution gives to Congress the authority to regulate commerce with international or with foreign nations.
[00:16:45] But again, though, I think, maybe a series of good faith, arguably mistakes, Congress has delegated that authority to the, to Congress. Executive branch, and that’s where we are now.
[00:16:59] Joe Selvaggi: So, the basis again, as I’ve read it, is they use section 301, which is a particular section of the, of, power, for, to impose tariffs based on unfair actions, from competing nations. So, we’re by virtue of the fact we’re using the section, we’re saying we’re doing it for the sole purpose or to combat unfair actions. I think this was a sort of a dusty old way of doing things, asserting that there are unfair actions. I think we have since come up with better ways of combating unfair practices.
[00:17:30] But this is something both now, of course, Biden has done it, but he’s really using it as something that Trump had done, maybe five, six years ago, using the same justification. Share with our listeners, what is this 301 and why did we dust it off, take it off the shelf and dust it off for this new raft of tariffs?
[00:17:45] Clark Packard: Yeah, it’s an excellent question. So, you’re right. The Biden administration is using Section 301 of the Trade Act of 1974, which allows the U.S. government to investigate and attempt to remedy quote unquote unfair actions and policies taken by foreign governments that violate U. S. trade agreements or unreasonably violations Burden U.S. Commerce.
[00:18:08] The statute is designed to create leverage to pry open foreign markets, by forcing the targeted governments to remove the offending measures. So, if you go back, the Biden administration is using the same investigation that the Trump administration used. which revolved around Chinese abuse of intellectual property and again, I thought that was a fairly compelling argument that the Trump administration made. I think it’s pretty clear that China does engage in the abuse of intellectual property to the detriment of American producers and ultimately American workers. and so as the review of those tariffs, statutorily mandated review, the Biden administration took those.
[00:18:51] That investigation and said, okay, now we’re going to extend these tariffs. And dramatically raised the rate to, let’s say, on electric vehicles, for example, they quadrupled the rate of the tariff from 25%, which was already very high, to 100%.and, I, ultimately the Biden administration is justifying this on national security grounds, but that’s a very different argument than, China engages in the abuse of intellectual property.
[00:19:23] I think both, you could make a case for both, but that’s, it’s incongruent the way, on one hand, they’re using a statute designed to combat intellectual property abuse.to now say, well, the importation of electric vehicles from China poses a national security risk to the United States. And I’m a lawyer, and so I have very serious statutory concerns, and I’ve said this publicly that if you want to go down this road, there was a right way to do this.
[00:19:54] There is a statute that gives the executive branch the authority to restrict imports in the name of national security. That’s the route you should have gone down, not trying to pigeonhole this into an argument about intellectual property and IP abuse.
[00:20:09] Joe Selvaggi: So, there’s no new allegations that China has suddenly, again we’re going to talk about the products that we’re imposing, you mentioned EVs, there’s no sort of allegation that suddenly China has taken U.S. EV, electronic, electric vehicle technology and stolen it and used that stolen technology to make cheaper vehicles. There’s no such allegation that Biden has not justified any of these with that particular 301 clause. style, accusation. There’s nothing new has come to light.
[00:20:39] Clark Packard: Yeah, that’s basically right. Again, the New York Times quoted senior administration officials saying, we firmly believe this is a national security risk. We’re concerned about data, from being transferred from, an American consumer driving around a Chinese EV. you and transmitting that data back to the Chinese Communist Party in Beijing.
[00:20:59] And again, if the U.S. wants to make that argument, I would look at that in good faith and, judge it on the merits. But at this point, that’s not what they’re arguing. I think what they’re doing is they’re doing this for political expediency. That is to say, we have this, uh, statutory, statutorily mandated review of the Trump tariffs.
[00:21:18] Thank you very much. We’re required to do it. We can adjust tariffs, under that authority, so we think it gives us carte blanche, to do this, and I’m skeptical because I think that erodes the rule of law, ultimately, which is one of the things that, that makes the United States such a, compelling country.
[00:21:35] The other place to invest for foreigners is that there’s very strong protection for the rule of law. We have a way of ensuring that the processes are taken care of according to the books, and it’s not just rank politics like you see in China, where might makes right and whatever the Chinese Communist Party wants. Ultimately is what happens. and so, yeah, I have a concern that it does erode the rule of law.
[00:22:01] Joe Selvaggi: Yeah, indeed. It reminds me that using the HEROES Act to forgive student debt, it, it just, it doesn’t pass the laugh test. So, let’s get into this, the tariffs on the cars. I will forgive our listeners if they will say that despite the fact that China makes more, Electric vehicles in any other country on earth.
[00:22:17] We don’t see too many of them because I don’t think we have any. I think my last is less than 1%.so we’re importing about 1 percent of the, Chinese electric vehicles. And yet we’ve decided to target them going from 25%, which You know, I don’t know the numbers, but makes it prohibitively expensive, 25%, going to 100%, which makes it, no, no producer could have 100 percent tax on their product and sell. So, what’s the logic of targeting a product that we don’t even use yet anyway? Is there any?
[00:22:46] Clark Packard: Yeah, their argument is, if we don’t get ahead of the curve, we face a massive shock of imports flooding the U. S. market, because that’s what Europe is seeing right now. Europe has experienced a deluge of Chinese EVs into various EU countries.
[00:23:06] And it’s a shock to the system, and producers in the EU are struggling to adjust. So, so the Biden administration is saying, we need to get ahead of this thing, and so we’re going to just basically wall off the United States from Chinese EVs. I think, like you mentioned, that very few EVs from China end up in the United States.
[00:23:26] It’s, like you said, it’s 1 percent of the U.S. EV market. But ultimately, I think this is mostly driven by politics. if you think about it, right, Donald Trump is promising a 60 percent across the board tariff on all products. Coming from China and a 10 percent tariff on all products coming from countries that are not China, so every other country in the world and so the Biden administration is trying to appeal, to a pretty narrow slice of voters in the Midwest, particularly, unionized auto workers. And say, saying, okay, we’re going to, do something pretty serious and severe to restrict foreign competition, and specifically target the Chinese, and so we’re going to announce 100 percent tariff.
[00:24:16] Shortly after they were announced, Donald Trump came out and said, well, I would impose a 200 percent tariff on imports of electric vehicles from China. At that point, it’s just silly. It doesn’t really matter if it’s 100 percent or 150 percent or 200%. None of those cars are entering the United States either way.
[00:24:33] Joe Selvaggi: I’m curious, though, again, this is a little sidetrack, if we take the sort of the rhetoric of the Biden administration wanting us all to be in electric vehicles, and given that the market is such that, sure, there are electric vehicles here, so like Tesla’s and actually Mercedes Benz and the, expensive, very expensive electric cars, very few inexpensive electric cars, so even if a person of modest means wants an electric car, they can’t afford it.
[00:24:56] So, essentially, this is making it very difficult for the U.S. to embrace the universal acceptance of electronic vehicles. We’re essentially, the policy seems in tension with itself. You can’t have everyone buy electric cars and then say, point them to the Tesla dealer. It’s just not possible.
[00:25:13] We’re, this tariff effectively, by banning, inexpensive, Electric vehicles from China, you’re essentially saying to the 90 percent of the car market, sorry, stick with your internal combustion engine car, right?
[00:25:24] Clark Packard: Yeah, that’s exactly right. I think that this is another example where when they’re, the Biden administration’s goals to If you take those three at a time, the folks who.
[00:25:33] Stand up a boost domestic manufacturing conflict with its stated goals on. Climate change, and like you said, embracing a transition. to a cleaner, functioning automobile. they’re always siding with. Domestic producers at the expense of their stated climate goals, because like you said, the tariffs will stump the deployment of EVs, and like maintaining solar tariffs, anytime, again, anytime a climate goal conflicts with a domestic manufacturing goal, the administration seems to side with manufacturing, and that’s not just the U.S. government. The Biden administration, the Trump administration did the same thing, although they didn’t have the same sort of stated climate goals, that the Biden administration has, but ultimately the last two administrations have bent over backwards to quote unquote protect a very narrow slice of the climate agenda.
[00:26:31] Manufacturing, domestic manufacturing industry. but yeah, I think it ultimately hurts the environment, again, much like a solar tariff. I’m of the opinion that it doesn’t really matter where a solar panel is made. If you firmly believe that climate change is, poses a systemic risk to the future of the world, then we should embrace very cheap, very rapidly deployable, technologies like Cheap solar panels from Indonesia and Vietnam and China.
[00:27:04] Joe Selvaggi: Right, it seems, either disingenuous or, if you believe what you say, as you say, if climate is the threat that most many say it is, We should not care where it comes from. I want to also talk about steel. It seems interesting to me, the justification for renewed steel tariffs is we want to use American clean steel.
[00:27:24] This is a new phenomenon. I wasn’t aware that we’re that much cleaner when we produce our steel. But again, the same logic obtains if we put a tax on Chinese steel that’s dirty, and only use American steel that’s clean, but that steel is more expensive and is an input to all U. S. products, cars, you name it. That makes those products more expensive, less sellable to the world. Again, it’s a big world. that means Chinese products become more competitive because plenty of places are happy to buy dirty steel from China and dirty steel products from China. Don’t we essentially make the world much dirtier by trying to, tax our way away from dirty Chinese steel?
[00:28:05] Clark Packard: Yeah, that’s right. And I’ve always said, I think it is pretty clear that the United States produces cleaner steel than China, but there are parts of Germany, for example, that produce cleaner steel than the United States. So should we be subsidizing the United States? The importation of steel from Germany, right?
[00:28:22] Like you can play these rhetorical games. but yeah, ultimately, I think you’re right. You tend to shoot yourself in the foot when you try to, play chess master, and dictate where global markets are going. I think demand would ultimately, be such that, there would be, Again, demand for cleaner steel, but the U.S. government sort of putting its thumb on the scale, I don’t think it has the best history of kind of picking and choosing, that. and again, I do think it ultimately undermines stated climate goals.
[00:28:52] Joe Selvaggi: And again, just double back to the solar panels. I think batteries, battery components, all kinds of things that go into electric products that are alternative to, let’s say, combustion engines, by making those more expensive, we make sure that we virtually guarantee that the uptake will be slower. People will have fewer solar panels, fewer electric cars with batteries, fewer electrified things if it’s more expensive. So effectively, we’re making the world dirtier with these tariffs, perhaps for good intentions, but perhaps misguided intentions. How about this weird thing about ship to shore cranes? I don’t understand this, so this doesn’t fall into any bucket. I’m curious what your view, as someone who studies this topic deeply, what is the logic of tariffs on ship to shore cranes?
[00:29:38] Clark Packard: I frankly, I don’t understand it. I think it’s that, that, the U.S. ports are pretty in dire shape, I would say. and there, there’s a concern that, oh, these products are being unfairly traded in the United States. But again, if you are serious about making sure we have the most competitive ports, and they’re dredged appropriately, and for deep enough purposes so that cargo ships can come in and out, it makes little sense to target it.
[00:30:07] Again, an input that, that we use to facilitate commerce. It’s, what kind of ship to shore crane production manufacturing is taking place in the United States? Is it that large of a constituency that, that we really need to protect that? I don’t know. but I, my, my assumption would be no.
[00:30:28] Joe Selvaggi: So, if there’s any argument for, whatever we want to call this. And the last thing we’re talking about, I’ll call it protectionism or tariffs or hostility towards foreign products. If there’s any justification that persuades me, it’s national security. And I think that was carted in, we mentioned in EV somehow, a Chinese electric vehicle is going to be like a moving TikTok account that’s going to transmit where you are going to the grocery store and that’s going to be some sort of strategic advantage China might have.
[00:30:54] As absurd as that is, I can’t imagine legitimate concerns about things like semiconductors or medical products that, God forbid, another pandemic or, armed conflict with China. We don’t want all our semiconductors to be coming from a place that. We’re in global competition. I don’t know if it winds up being confrontation, isn’t it just a national security issue to ensure we have the medicine and the chips that we need, God forbid, if there’s a conflict in the future?
[00:31:21] Clark Packard: Yeah, I think that’s right, right? I’m an adamant free trader. I’m a Cato, crazy Catoite, as they say, but even I would acknowledge Milton Friedman, one of my heroes, Adam Smith, all recognize that there is a national security exception, but I tend to think that national, the national security exception Has a history of swallowing, the rule, and basically becoming a protectionist cudgel, right?
[00:31:45] So, so the Trump administration in 2018, 2017, 2018, imposed national security tariffs on imported steel, including from countries like NATO allies, Israel, Canada, under no sort of rational argument is Canadian rebar a national security threat to the United States. So, again, I’m very skeptical about how this plays out.
[00:32:12] takes place in reality. but again, I, my hope is that ultimately Congress would more tightly define what it, what national security means such that we could ferret out, bogus claims about Canadian steel being a national security risk and focus on, again, I think there are compelling arguments, on semiconductors in particular.
[00:32:35] I’ve written, multiple times that I think some trade with China needs to decline. but I think that the overwhelming majority is doesn’t impose or impose any national security risk or doesn’t. Result in sort of one sided dependencies, but the semiconductor example is exactly right.
[00:32:53] I think that there are ways we need to be more circumspect about Chinese chips in the United States, and we need to be more circumspect about exporting chips to China. but ultimately, the administration’s export controls, I think, were way too broad. I think you can make a compelling case to, to restrict the sales of tip top upper echelon chips coming from the United States to China.
[00:33:16] That maybe makes perfect sense that, hey, this could be used in a weapon that could ultimately be turned around on us. but ultimately, I think a lot of this is just rank protectionism, and my hope is over the Again, we can get a tighter definition. of national security so that we can ferret out legitimate claims and separate out legitimate claims from more bogus claims.
[00:33:38] Joe Selvaggi: Well, you had, I appreciate you making the self-deprecating, Maketo nut. One of the reasons I love to have Maketo guests on the podcast is because you don’t have, one doesn’t have a party allegiance, one, one can still be wrong, but not for, party loyalty, as a reason. But now we’re facing in November an election, and we’ve made very clear in our conversation that both candidates seem to be very tied to out tariffing each other, if I’ve invented a new word.
[00:34:06] Nobody seems to advocate for what I believe the benefits of free trade, which are benefits for everyone. All of us are consumers. We all would like less expensive products. We all should invite competition from the world, because Well, it’s still easier and better to make things here, we, our manufacturing, we still produce 26 percent of everything made in the world, even though we’re 4 percent of the world’s population, we’re doing just fine, but let’s play this out. If both candidates are pro protection, pro tariff, where will the free trade advocates come from? Are there any out there in the wilderness? or is the battle lost to this, these rhetorical flourishes of, People before profits or whatever the slogan is today.
[00:34:48] Clark Packard: Yeah, it’s an excellent question. Trade is the one issue that is almost unanimous among economists. If you look at the University of Chicago, they do these polls of economists. Do you think this tariff makes sense? Yes, or no? And why? And explain your rationale and what’s your intensity level on a one to 10 basis. and basically, it’s like 95 percent of all professional economists believe that And I think this is something that economists argue in favor of free trade.
[00:35:16] Again, you can find economists that support higher taxes and lower taxes and more regulation, less regulation. But when it comes to trade truly is the one issue that sort of unites economists. But that’s an interesting point. It’s a sort of predicament where it’s like, okay, the professionals who study this all the time are isolated, and detached from the policymaking world.
[00:35:39] I ultimately think that there are enough folks who get it in Congress and the administration. I think, the Biden administration is pretty well split between, more protectionist folks. And then, people like. Janet Yellen, the Treasury Secretary. She knows deep down that a lot of these tariffs are ill conceived, but ultimately has to give way to political, factors, overriding the economics.
[00:36:03] So, I’m pessimistic in the short run, but my hope is that we can get back and maybe the protectionist fever will break, and we can get back to this, for about 75 years, there was a bipartisan consensus in favor of open trade, in the United States. And again, that was Republicans and Democrats for 75 years, up until 2016 with President, Trump.
[00:36:26] And then now, continuing into the Biden administration. So, my again, my hope is over the long term, we can get back to that. That preexisting bipartisan consensus in favor of relatively open trade. That’s not to say we’ll ever get into a position like Cato would prefer where the United States just unilaterally drops all of its tariffs, irrespective of what foreign countries do. Ultimately, that’s right on the economics, but not really practical. So, I think, the United States getting back in the business of negotiating more free trade agreements, I think, would be good. but my hope is maybe in the medium run, maybe in the next five years, maybe the, hopefully the fever will break.
[00:37:04] Joe Selvaggi: Yeah, one hopes. I like that. You’re planning for the long term. I thought the participants of the digital science know that in the long run, we’re all dead. All right. Well, I appreciate you coming on the show and sharing your wisdom with us. I appreciate your reading and writing your research. where can our listeners, read more of your work, at Cato and elsewhere where you’re doing your research and putting out some, I think, very persuasive pieces on the merits and virtue of free trade.
[00:37:32] Clark Packard: Thanks. Yeah, Cato.org. And then, I’m on Twitter. It’s, at Clark underscore Packard, P A C K A R D. and I tend to tweet most of the things I write. So, yeah, those are both good places to, to see it. See if I’m, what I’m arguing makes sense.
[00:37:48] Joe Selvaggi: Right, well, again, if someone’s hardcore protectionist, I’m not sure a half hour with a conversation is enough to persuade them, but perhaps some more in-depth reading will, will get them going. So, if we’ve piqued their interest, we’ve done something here. So, thank you very much for joining me today, Clark. You’ve been a great guest and I really appreciate you taking the time with us. Thank you. Well, thanks again, and thanks for the invite. This has been another episode of Hubwonk. If you enjoyed today’s show, there are several ways to support Hubwonk and Pioneer Institute.
[00:38:17] It would be easier for you and better for us if you subscribed to Hubwonk on your iTunes Podcatcher. It would make it easier for others to find us if you offer a 5 star rating or a favorable review. We’re of course grateful if you share Hubwonk with friends. If you have ideas or comments or suggestions for me about future episode topics, you’re welcome to email me at hubwonk@Pioneerinstitute.org. Please join me next week for a new episode of Hubwonk.
Joe Selvaggi talks with international tax and trade expert Clark Packard about the tension between the economic and political calculus behind the Biden administration’s recently announced tariffs on Chinese products, including EVs, batteries, and steel.
Guest: